Jobless rate falls to 3.8 percent, its lowest since 2000 NATION & WORLD, A-2
The U.S. economy roared into overdrive last month, the Labor Department reported Friday, extending the longest streak of job growth on record and echoing other recent signs of strength.
The unemployment rate fell to 3.8 percent, its lowest level since the heady days of the dot-com boom in early 2000. The net increase of 223,000 jobs reflected healthy gains in a broad range of industries, from manufacturing and transportation to health care and retailing.
It was the 92nd consecutive month of job creation. Most economists expect the momentum to continue, but a deeper drop in the unemployment rate or a big bump up in average hourly earnings would stoke fears of inflation and, in turn, a more hawkish Federal Reserve.
Fed policymakers are almost certain to raise interest rates when they meet this month, with at least one additional increase likely in the second half of 2018. In May, average hourly earnings rose slightly, lifting the year-on-year gain to 2.7 percent.
That’s healthy enough to assuage fears that wages are stagnating but not so strong as to change the Fed’s expected course.
“It was a stronger report than expected, but it wasn’t so hot as to lead the Fed to believe it’s behind the curve,” said Michael Gapen, chief U.S. economist at Barclays, adding that the Fed’s plans shouldn’t worry stock-market bulls.
“It will keep the Fed on its gradual normalization path.”
Indeed, the stock market rallied in the wake of the news. The Standard & Poor’s 500-stock index finished the day up more than 1 percent.
Bond prices dipped slightly as traders braced for the possibility of faster economic growth, lifting the yield on benchmark 10-year Treasury bonds to 2.9 percent.
Gapen believes the unemployment rate could sink as low as 3 percent by the end of 2019. That would bring it to levels last seen in 1953, the height of the economic boom after World War II.
The only negative in the report was a slight drop in the share of Americans who are either working or looking for a job, paced by a 170,000 increase in the number of people not in the labor force. That, in turn, put downward pressure on the unemployment rate, which sank from 3.9 percent in April.
Still, the overall report painted a picture of a robust labor market by any measure.
Unemployment among AfricanAmericans fell to 5.9 percent from 6.6 percent in April, the lowest since the Labor Department began breaking out unemployment by race in 1972.
Among college graduates, the unemployment rate is 2 percent, while it stands at 3.9 percent for workers with a high school diploma.
“It was certainly a good number, with some weather-related bounce-back in construction,” said Diane Swonk, an economist with Grant Thornton.
While the unemployment rate may have moved in the right direction last month, she added, “it went down for the wrong reason, a reduction in the size of the labor force.”
Swonk said the great conundrum in the current economic environment was why wage growth had been so modest.