WASHINGTON–The latest economic numbers are being greeted by economists with mixed reactions.
While the unemployment rate declined to 4.3% in May, the lowest level since May of 2001, it was due in part to the fact more Americans stopped looking for work and the number of people with a job, declined, as well. In addition, while the economy added 138,000 jobs, that number is down from the 174,000 new jobs added in April and was below expectations.
Analysts were cheered, however, that wages have continued to tick up, with hourly earnings rising 2.5% during the past 12 months.
Through May of 2017, the U.S. has added 810,000 jobs. Healthcare and business services led the way in May, adding 24,000 and 38,000 jobs respectively.
Steve Hovland, director of research with HomeUnion, suggested that “May’s job report weakened the Fed’s narrative and could put a June interest rate hike in question. Members of the Federal Open Market Committee (FOMC) will need to weigh whether the lowest unemployment rate in 16 years is sufficient to justify a rate hike despite relatively low monthly employment gains thus far in 2017. Although the FOMC has become more aggressive over the past year, dovish members may have sufficient fodder to sway the vote at the important June 13-14 meeting.”
One question the Fed will need to wrestle with, said Hovland, is whether the below-average monthly job gains are due to a labor shortage, or is there weakness emerging in the job market? Most evidence points towards the former, he said, and that should keep the Fed on track to lift rates two additional times in 2017, even if it waits until September. Job openings remain near record-high levels, indicative of a skills gap rather than hesitant employers. Furthermore, the stock markets regularly flirt with record highs, job growth has been positive for the longest post-war stretch, and home prices have soared.