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US unemployment falls to 3.8% in May, lowest in 18 years
WASHINGTON, June 2, 2018 (BSS/AFP) – The US unemployment rate fell to its
lowest level in 18 years in May, the Labor Department reported Friday,
showing the world’s biggest economy remains robust even as President Donald
Trump’s aggressive trade policies have stoked fears of an all-out trade war.
The jobless rate fell to 3.8 percent from 3.9 percent in the prior month,
the lowest level since April 2000.
The last time the rate was lower than 3.8 percent was December 1969.
With a shortage of workers reported throughout the country and across many
industries and skill levels, the latest data confirmed wages are rising.
The economy added 223,000 non-farm jobs last month, stronger than the
consensus forecast of economists, and better than the increase of 159,000 in
April.
And the jobless rate for African American workers dropped sharply in the
month to 5.9 percent from 6.6 percent, the lowest since the government began
keeping records in 1972.
President Donald Trump has been touting that figure as a major
accomplishment of his economic policies.
“We have reached yet one more historic milestone with 3.8 percent
unemployment just announced, and another all-time record low African-American
unemployment,” Trump said at an event shortly after the data were released.
At an event later Friday he continued to tout the strong results.
“We have such a great country right now,” he said. “We have some of the
best economic numbers we’ve ever had as a nation and that goes a long way.
And we’re building something very special.”
But many economists and businesses have warned that jobs and economic
growth could be victims of Trumps confrontational trade policies which
includes steep tariffs on steel and aluminum that have hit key allies.
– Trump breaks protocol –
Trump broke with protocol by tweeting about the report an hour before
release time, hinting the figures would be positive.
“Looking forward to seeing the employment numbers at 8:30 this morning,”
he said on Twitter.
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The data are kept strictly confidential and subject to tight security to
prevent early release since investors worldwide are waiting to trade on the
information.
The report is given to the White House a day in advance, although
officials never hint at the contents.
A government rule prevents officials from commenting on sensitive data
reports until one hour after release, something Trump administration
officials have ignored on various occasions.
Markets did not appear to react to the tweet ahead of release time, but
were delighted afterward.
US stocks surged after the opening bell, and mostly continued upward, with
the tech-rich Nasdaq closing up 1.5 percent, while the Dow gained 0.9
percent.
– Inflation pressures? –
With robust hiring continuing — well beyond the monthly average of
179,000 for the past three months — employers have been reporting the need
to increase salaries and benefits to attract workers and keep them from being
poached by competitors.
The report shows average hourly earnings rose 0.3 percent last month to
$26.92, which is 2.7 percent higher than a year ago.
And the pace of hiring is shrinking the pool of available workers —
defined as those working or actively looking for work — and that was the
main driver behind the lower unemployment rate.
With wage gains finally above the Federal Reserve’s two percent inflation
target, the central bank will be watching carefully to see if rising salaries
translate into accelerating price increases.
However, the Fed signaled clearly that it is willing to tolerate inflation
slightly above two percent for a short period.
The central bank is widely expected to raise the benchmark lending rate at
its meeting later in June, the second increase of three or four expected this
year.
– Hiring trending up –
Hiring was strong across multiple sectors, although there was a slowdown
in manufacturing — contrary to Trump’s repeated claims that the industry is
adding workers due to last year’s tax cuts and his trade policies, which
include steep tariffs on aluminum and steel.
The manufacturing sector added 18,000 workers, the least since September
2017, retailers added 31,000, while health care rose 29,000 and construction
25,000.
Ben Herzon of IHS Markit said the labor market “is tightening rapidly” —
meaning the jobless rate is likely to fall further.
“Nearly all aspects of this report were positive and consistent with solid
growth of wage-and-salary income in the second quarter,” Herzon said.
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