Unemployment just fell for all the wrong reasons

"We saw a bit of a May malaise on the part of employers", Mark Hamrick, chief USA economist for Bankrate.com, said in an e-mailed statement.

The economy added just 138,000 net new jobs for the month, well below analyst expectations, while the jobless rate decreased by a tenth of a point to 4.3 percent.

"Given reports that job openings are near all-time highs, it suggests that businesses are struggling to fill these positions in an increasingly tighter market", said Beth Ann Bovino, chief USA economist for S&P Global Ratings.

Those people were not in the labor force, wanted and were available for work and had looked for a job at some time during the prior 12 months. That puts average monthly job growth over the past quarter (March through May) at only 121,000 jobs, down by more than 50,000 jobs monthly from the same growth rate of 186,000 jobs/month over the one-year period from May 2016 through April 2017.

Average hourly earnings, a closely-watched metric, rose 0.2% during the month, as expected, putting year-over-year wage gains at 2.5%.

Employment in the retail sector has fallen for four straight months, and the leisure and hospitality sector is adding jobs at a slower pace compared with earlier in the expansion. Health care and business services led the way in May, adding 24,000 and 38,000 jobs respectively. Construction added 11,000. As energy prices stabilize somewhat, the mining sector - which includes oil, natural gas, coal and metal ore - added 6,600 jobs last month.

Employment in other major industries, including construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, and government, showed little change over the month. Manufacturing payrolls fell by 1,000. The Fed is expected to increase rates again in June, which would only be the fourth rate hike since the Great Recession.

Still, if hiring maintains even its current slower pace, it would exceed population growth, and the unemployment rate should eventually fall even further below its current 4.3 percent, a level associated with a healthy economy. With these revisions, temporary help employment growth was 1,900 less than previously reported. Those people, who would have preferred full-time employment, were working part time because their hours had been cut or they were unable to find a full-time job.

Known as the "U-6" rate, this measure is one of the favorite metrics for Trump administration officials. With total growth dipping to a mere 138,000 jobs added for May, the slowdown equates to a 20 percent speed bump. This is emphasized by the fact that according to the Household Survey, the labor force dropped by 429,000, and the number of employed dropped by 233,000, these numbers, of course, are far larger than the number of jobs created for the month and suggest that a significant number of people simply gave up looking for work. As more people start seeking jobs, employers begin to have less incentive to raise pay. Hourly earnings rose 2.5% during the past 12 months.

The jobs report is a closely watched barometer of the United States economy and one of the metrics the U.S. central bank considers as it sets interest rates.

  • Zachary Reyes