Published: Sat, June 03, 2017
Economy | By Melissa Porter

US job growth slows; unemployment rate drops to 4.3 percent

The share of people who are either working or job hunting relative to everyone in their prime working age - the labor-force participation rate - declined to 62.7% from 62.9%.

Unemployment in the USA dropped to 4.3% in May, the lowest since February 2001, despite slowing employment growth that may weigh on the Federal Reserve's consideration of another interest-rate hike in two weeks.

But the unemployment rate dropped to 4.3% in May - its lowest level since May 2001. Average monthly job growth so far this year is now 162,000, compared with 178,000 in 2016.

The labor force participation rate fell slightly to 62.7 percent during President Donald Trump's fourth full month in office, continuing to trend at its lowest rate since the late 1970s.

Average hourly earnings for private-sector workers increased by 4 cents to $26.22 an hour in May.

But economists at Moody's Analytics said the soft jobs number in May might omit summer hiring that occurred later in in the month. Job gains for March and April were revised downward in the May report and are well below the strong gains of January and February.

"We suspect there is only limited scope for the prime age participation rate to keep rising", said Michael Pearce, a USA economist at Capital Economics in NY. The core personal consumption expenditures index, which the central bank uses as its key inflation gauge, registered 1.7% in April, remaining below the Fed's 2% target.

Several economists have said the weather effects had played out by May, and so job growth was expected to roughly hew to its most recent three-month average of 174,000.

The CME Group's federal funds futures, a tool used to predict market expectations for changes in monetary policy, showed odds of 93.5% in favor of a rate rise in June, up from 87.7% a week ago.

Still, most analysts think job growth is solid enough for the Federal Reserve to feel confident enough to raise interest rates again when it meets in two weeks.

At their May meeting, Fed officials indicated that they were ready for another small increase if the economy strengthened after a sharp slowdown in growth over the winter that their official policy statement said was "likely to be transitory". Job gains are slowing as the labour market nears full employment. Workers generally enjoy higher incomes once they generate more value per hour on the job.

That left the year-on-year increase in wages at 2.5 per cent. The Fed in its Beige Book on Wednesday said a manufacturing firm in the Chicago district reported raising wages for unskilled laborers by 10 percent to attract better-quality workers and retain its workforce. Manufacturing lost 1,000 jobs and construction gained 11,000 new employees.

An alternative measure of unemployment and underemployment, which includes those who have stopped looking and those in part-time jobs who want full-time positions, was 8.4% in May, versus 8.6% the prior month. Retailers trimmed their ranks by 6,100 jobs.

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