US unemployment falls to 16-year low despite slowdown in job growth
Employment gains in the two months prior to May were not as strong as previously reported, suggesting the labour market was losing momentum
![The modest increase could raise concerns about the economy's health after growth slowed in the first quarter](https://static.independent.co.uk/s3fs-public/thumbnails/image/2017/06/02/14/us-jobs.jpg)
Support truly
independent journalism
Our mission is to deliver unbiased, fact-based reporting that holds power to account and exposes the truth.
Whether $5 or $50, every contribution counts.
Support us to deliver journalism without an agenda.
![Louise Thomas](https://static.independent.co.uk/static-assets/support-us/louise-thomas.png)
Louise Thomas
Editor
US job growth slowed in May and employment gains in the prior two months were not as strong as previously reported, suggesting the labour market was losing momentum despite the unemployment rate falling to a 16-year low of 4.3 per cent.
Nonfarm payrolls increased 138,000 last month as the manufacturing, government and retail sectors lost jobs, the Labour Department said on Friday. March and April data was revised to show 66,000 fewer jobs created than previously reported. May's job gains marked a sharp deceleration from the 181,000 monthly average over the past 12 months.
While last month's job gains could still be sufficient for the Federal Reserve to raise interest rates this month, the modest increase could raise concerns about the economy's health after growth slowed in the first quarter.
The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population. Job gains are slowing as the labour market nears full employment.
The unemployment rate fell one-tenth of a percentage point to its lowest level since May 2001. It has dropped five-tenths of a percentage point this year. Last month's drop came as people left the labour force. The smaller and more volatile survey of households also showed a drop in employment.
The closely watched employment report was released less than two weeks before the Fed's 13-14 June policy meeting.
Economists polled by Reuters had forecast payrolls increasing by 185,000 jobs last month and the unemployment rate holding steady at 4.4 per cent.
Prior to the report, US financial markets had almost priced in a 25 basis points increase in the Fed's benchmark overnight interest rate this month, according to CME FedWatch.
Minutes of the Fed's 2-3 May policy meeting, which were published last week, showed that while policymakers agreed they should hold off hiking rates until there was evidence the growth slowdown was transitory, “most participants” believed “it would soon be appropriate” to raise borrowing costs.
The US central bank raised interest rates by 25 basis points in March. Data on consumer spending and manufacturing suggest the economy gained speed early in the second quarter after gross domestic product increased at a tepid 1.2 per cent annualised rate at the start of the year.
The Atlanta Fed is forecasting GDP increasing at a 4.0 per cent pace in the second quarter.
But persistently sluggish wage growth could cast a shadow on further monetary policy tightening. Average hourly earnings rose four cents or 0.2 per cent in May after a similar gain in April.
That left the year-on-year increase in wages at 2.5 per cent.
The tepid average hourly earnings reading comes as annual inflation rates have retreated in recent months. But with the labour market expected to hit full employment this year, there is optimism that wage growth will accelerate.
Reuters
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments