New Jobs Almost 50,000 Less than Expected

In May, job creation took a steep drop with only 138,000 new jobs created, and the unemployment rate dropped to 4.3%, according to data released on Friday by the Department of Labor in the U.S.

Economists were expecting nonfarm payrolls to increase by over 185,000 and the rate of unemployment to remain at April’s 4.4%.

Growth in wages was also disappointing with the average earnings per hour increasing just 2.5% at an annualized rate. The average length of a work week remained unchanged at 34.3 hours.

Along with the weak numbers for May, previous months saw significant revisions downward. March’s weak results of 79,000 were reduced to just 50,000, while the number for April of 211,000 was cut to 174,000.

Taken together, growth in jobs has averaged only 121,000 the last three months.

Business and professional services was the leader in adding new jobs in May with 38,000 while healthcare was up by 24,000. Mining increased by 7,000 and restaurants and bars added another 38,000.

Job creation was skewed toward professions that are lower-wage. Full time employment fell 367,000 in May, while part-time employment increased by over 133,000.

The decline in the unemployment rate was primarily due to a drop in the participation rate of the labor force, which dropped by two-tenths of one percent to 62.7% and remained close to its lowest overall levels since the latter part of the 1970s. The unemployment rate however is at its lowest since May of 2001.

Another measure used for the amount of joblessness takes into account workers who are discouraged or underemployed and that dropped to 8.4% the lowest reading that has had since November of 2007.

The report has been released amidst hopes that the economy will grow after a first quarter that was anemic that saw the GDP grow only 1.2%. President Trump promised his agenda, which he called pro-growth, would spark the economy that has shown a steady, yet slow growth since the Great Recession ended.

Policymakers at the Federal Reserve have been watching the job data particularly for increases in wages. The U.S. central bank is expected to keep its path of rate increases but the slowness of inflation might alter the bank’s plans.

Despite that weakness, it will likely not be enough to deter the Fed from moving forward with a June rate hike and a continued path to a more normalized policy.