The nation’s unemployment rate fell to 4.3 percent in May, the lowest level since 2001, but the United States added a lackluster 138,000 jobs, well below what economists were expecting.
The question is what the Labor Department’s latest report reveals about trends in the economy. It could be that in a tightening job market employers are having a hard time identifying applicants who have the skills and experience they need.
“Business complaints of labor shortages have become increasingly widespread,” economist Ted Wieseman of Morgan Stanley told MarketWatch after the jobs report was issued on June 2.
The recreational marine industry, for example, has struggled in recent years to find greater numbers of skilled technicians to fill the jobs it is offering.
As for other industries, Bloomberg said in a report that slower hiring may be a sign that businesses are reluctant to add workers until they see whether the Trump administration’s goals of a stronger economy translate to legislation that cuts taxes and boosts growth.
“Job growth is a little disappointing, but enough to continue tightening the labor market,” Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, told Bloomberg. “This doesn’t change the overall story of an economy that generally seems to be growing above trend and reducing slack.”
The government said the May jobs figure was well below the average monthly gain of 181,000 during the prior 12-month period. The decline in the jobless rate was attributable to people leaving the labor force.
The Labor Department revised its March and April job totals downward by a total of 66,000. The April figure declined from an originally reported 211,000 to 174,000. The March figure fell from 79,000 to 50,000. The three-month average payroll increase was the lowest since 2012.
Judgments about what strong job growth looks like have changed as the economy continues to expand, the New York Times reported. As more baby boomers retire, about 100,000 fresh jobs a month should be enough to cover people newly entering the work force.
“Even though job growth slowed, it’s still well above where it needs to be to keep up with the working-age population growth,” Jed Kolko, chief economist at Indeed, an online recruiting site, told the Times. “It’s inevitable that we would start to see a slowdown in the payroll numbers. Month-after-month job gains in the 200,000 range are not sustainable longer-term. The working-age population is growing too slowly to support that.”
Average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents, or 0.2 percent, to $26.22, in May. During the past year average hourly earnings have risen by 63 cents, or 2.5 percent.
MarketWatch said many economists are forecasting that wages will soon start to rise faster as companies try more aggressively to fill open positions.
Meanwhile, consumer spending remains on the rise. The Commerce Department said it climbed 0.4 percent in April, the largest increase since December. In addition to rising incomes, tax refunds that the government had slowed during the winter as part of a fraud-fighting effort helped Americans afford to buy more things. Personal income rose 0.4 percent in April.
“Consumers are back out in force this quarter, spending their hearts away after taking the first quarter of the year off,” Chris Rupkey, chief financial economist at Mitsubishi UFG Union Bank in New York, told the Los Angeles Times.
Nonetheless, there are recent signs that consumer confidence may have reached a post-presidential election peak and could be poised to decline. Confidence held steady in the final May report from the University of Michigan, but slipped a bit in The Conference Board’s report for the month.
The Consumer Confidence Index dropped for the second month in a row to 117.9 from 119.4 in April. It had risen to 125.6 in March, its highest level since December 2000.
“Consumer confidence decreased slightly in May, following a moderate decline in April,” Lynn Franco, director of economic indicators at The Conference Board, said in a statement. “However, consumers’ assessment of present-day conditions held steady, suggesting little change in overall economic conditions. Looking ahead, consumers were somewhat less upbeat than in April, but overall remain optimistic that the economy will continue expanding into the summer months.”
The University of Michigan’s Consumer Sentiment Index edged up slightly in May to 97.1 from 97.0 in April.
“Consumer sentiment has continued to move along the high plateau established following Trump's election,” Richard Curtin, chief economist of the university’s Surveys of Consumers, said in a statement.
“The final May figure was virtually unchanged from either earlier in May or the April reading. Indeed, the May figure was nearly identical with the December-to-May average of 97.3. Moreover, the partisan divide between Democrats and Republicans has also remained largely unchanged, with the first expecting a recession and the other more robust economic growth.”
The housing market, an economic bellwether, retreated in April, the most recent month for which data are available.
The Commerce Department said new-home sales for the month were at a seasonally adjusted annual rate of 569,000, although that was 0.5 percent higher than in the same month last year. It followed a March pace that was revised upward to 642,000, which was the highest in nine and a half years.
Reuters said the housing market’s recovery does not appear to be in jeopardy, noting that economists believe mild winter weather drew sales into the first quarter that otherwise might not have occurred until the spring months.
"Demand for housing remains strong and the usual list of support factors hasn't changed, with the key items being job growth and wage gains," Jennifer Lee, a senior economist at BMO Capital Markets in Toronto, told Reuters.
Existing-home sales dropped 2.3 percent to a seasonally adjusted annual rate of 5.57 million in April from a downwardly revised 5.70 million in March, the National Association of Realtors reported.
"Last month's dip in closings was somewhat expected, given that there was such a strong sales increase in March at 4.2 percent, and new and existing inventory is not keeping up with the fast pace homes are coming off the market," Lawrence Yun, the association’s chief economist, said in a statement. "Demand is easily outstripping supply in most of the country and it's stymieing many prospective buyers from finding a home to purchase."