The US economy added 223,000 jobs in May, according to the Bureau of Labor Statistics. Wall Street economists had expected an increase of about 190,000.
The unemployment rate dropped to 3.8 per cent from 3.9 per cent the previous month, the lowest reading since April 2000. The jobless rate fell further below Fed estimates of levels sustainable in the long run, indicating a growing shortage of available labour.
Revisions to prior reports added a total of 15,000 jobs to payrolls in the previous two months, resulting in a three-month average of 179,000. Job gains have averaged 207,000 a month this year. Economists estimate that monthly payroll gains of about 100,000 are sufficient to keep pushing down the unemployment rate.
The U-6 underemployment rate – a broad measure of unemployment and underemployment that includes Americans stuck in part-time jobs or too discouraged to look for work – fell to 7.6 per cent from 7.8 per cent.
Wages grew more than expected, rising to a 2.7 per cent year-on-year pace from 2.6 per cent in April. Average hourly earnings rose 0.3 per cent month-on-month, topping projections for 0.2 per cent.
The participation rate, or share of working-age people in the labour force, slipped to 62.7 per cent from 62.8 per cent in April. The retirements of older workers have been exerting downward pressure on rate, which is still hovering at its lowest since the late 1970s, a time when women were still entering the workforce in greater numbers.
Education and healthcare led the gains with 39,000. Retailers added 31,100 jobs. Professional and business services took on 31,000 workers. Construction companies created a healthy 25,000 positions. Manufacturing added 18,000 jobs.
The average work week for all private employees was unchanged at 34.5 hours.
A strong jobs report has lifted expectations for a Fed rate increase this month and strengthens the case for four hikes this year, rather than three.
The S&P 500 ended 1.1 per cent higher on Friday, while the tech-heavy Nasdaq Composite index gained 1.5 per cent and the Dow Jones Industrial Average added 0.9 per cent. The dollar index, measuring the greenback against a weighted basket of global peers, was up 0.2 per cent at 94.16. The yield on the policy-sensitive two-year Treasury increased 5 basis points to 2.48 per cent, while that on the benchmark 10-year was up 4 bps to 2.90 per cent.
photo: Metropolitan Transportation Authority of the State of New York CC BY 2.0
