U.S. continues hiring momentum in May; unemployment rate reaches 18-year low
U.S. employers extended a streak of solid hiring in May, adding 223,000 jobs and helping lower the unemployment rate to an 18-year low of 3.8 per cent from 3.9 per cent in April.
Average hourly pay rose 2.7 per cent from a year earlier, a slightly faster annual rate than in April, the Labor Department reported Friday. But pay growth remains below levels that are typical when the unemployment rate is this low.
Still, the report shows that the nearly nine-year old economic expansion — the second-longest on record — remains on track. Employers appear to be shrugging off recent concerns about global trade disputes.
Friday’s report showed that hiring in the United States is benefiting a wider range of Americans: The unemployment rate for high school graduates reached 3.9 per cent, a 17-year low. For black Americans, it hit a record low of 5.9 per cent.
“The economy and labour market appear to be firing on all cylinders, with all sectors showing strength,” said Paul Ashworth, chief U.S. economist at Capital Economics.
Investors applauded the report. The Dow Jones industrial average rose 221 points, or 0.9 per cent. Other indexes also moved higher.
The healthy jobs data makes it more likely that the Federal Reserve will keep raising interest rates this year — at least twice more and possibly three more times, after having raised its key rate in March. Traders now put the likelihood of four rate hikes for 2018 at about one-third, up from one-quarter on Thursday.
With the jobless rate so low, employers have complained for months about the difficulty of finding workers to fill jobs. The number of open positions reached a record high in March. Friday ’s report suggests that some companies are making extra efforts to find people.
For example, the number of parttime workers who would prefer full-time jobs declined slightly and is down six per cent from a year ago. That may mean that businesses are converting some parttimers to full-time work.
Companies are also hiring the long-term unemployed — those who have been out of work for six months or longer. Their ranks have fallen by nearly one-third in the past year. That’s important because economists worry that people who are out of work for long periods can see their skills erode. Yet employers now seem more willing to hire them.
The unemployment rate, rounded to one decimal, is the lowest since April 2000. But the unrounded figure is 3.75 per cent. That is the lowest since 1969, some economists notes.
The job gains in May were broadbased: Professional and business services, which includes higherpaying fields such as accounting and engineering, added 31,000 jobs. Health care, a consistent job engine for the entire recovery, gained nearly 32,000.
Manufacturing, which is benefiting from increased business investment in machinery and other equipment, added 18,000 jobs, and construction 25,000.
Some economists remain concerned that the Trump administration’s aggressive actions on trade could hamper growth. This includes the U.S. tariffs on steel and aluminum imports from key allies in Europe, Canada and Mexico.
While the tariffs themselves would likely have only a scant direct impact on the economy, ongoing uncertainty about which trading partners and which goods might be hit next could disrupt some companies’ expansion plans.
For now, the solid hiring data coincides with other evidence that the economy is on firm footing after a brief slowdown in the first three months of the year. Consumers have started to spend more freely, after having pulled back in the January-March quarter.
Consumer spending rose in April at its fastest pace in five months.
Companies are spending more on industrial machinery, computers and software — signs that they’re optimistic enough about future growth to expand their capacity.
Macroeconomic Advisers, a forecasting firm, says it now foresees the economy expanding at a robust four per cent annual pace in the April-June quarter, which would be the fastest in nearly four years. That is up from its forecast last week of less than a three-per-cent rate for the current quarter.