U.S. Employment Climbs Less Than Expected In May

As we've written before, weird things can happen when an economy approaches "full employment," namely that there's less scope for bumper growth in jobs every month.

"While the message was a little muddied today, the evidence generally suggests the labor market is cyclically tightening, and the Fed will need to continue to lean against that", said Michael Feroli, an economist at JPMorgan in NY. "Perhaps more in question is the signal coming out of that meeting regarding subsequent hikes".

This measure, however, does not account for those individuals who have dropped out of the labor force-it simply measures the percent of those who did not have a job but actively sought one over the month.

Average hourly earnings increased by 4 cents to $26.22, after a 5-cent increase in April.

Nonfarm payroll employment increased by 138,000 in May, compared with an average monthly gain of 181,000 over the prior 12 months. "If there is a dark cloud in the data, it is that there aren't enough qualified workers to fill the available jobs".

There are, however, fears that political scandals could derail the Trump administration's economic agenda.

The figures from America's Labour Department dampened a stock market rally which had seen the FTSE 100 touch its latest record high in earlier trading.

The Fed raised interest rates in March. Yet further negative news could cause the Fed to reconsider its plan of gradually raising interest rates later this year, as the central bank eases off its efforts to stimulate the economy. The rate was last this low in May 2001. Long-dated U.S. Treasury yields fell to almost seven-month lows, and short-dated yields touched their lowest in more than two weeks.

Manufacturing didn't help the cause, however, losing 1,000 jobs in May - snapping five straight months of jobs gains. The Atlanta Fed is forecasting GDP increasing at a 3.4 percent pace in the second quarter.

A troubling reveal about the job market relates to wage growth. Instead, Brainard is anxious by the fact that low unemployment and the seemingly strong labor market haven't stoked higher core inflation (which strips out volatile food and energy prices).

The decline in the unemployment rate came as the number of people outside the labour force - neither working nor looking for work - increased in May.

The unemployment rate, now at its lowest level in 16 years, is expected to remain unchanged at 4.4%.

The underemployment rate, the number of part-time workers wishing to work full-time jobs fell to 8.4%. Over the last 12 months, this sector has added 267,000 jobs, so this month's figures actually beat the average over that period. The industry has added an average of 46,000 jobs per month thus far this year, in line with the average monthly job gain in 2016. Brick-and-mortar stores are struggling to compete with Amazon and other online retailers; in recent months, analysts have begun talking openly about the possibility of a "retail apocalypse". Employment at all levels of government fell by 9,000 last month.

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  • Zachary Reyes