Job growth came in short of expectations in May as the U.S. economy added 138,000 new payroll jobs, the Bureau of Labor Statistics reported Friday morning, but the unemployment rate edged down a tenth of a percentage point to 4.3 percent, the lowest such mark since May 2001.
Not only did May miss private-sector forecasters' expectations for 185,000 new jobs, but the past two months' job gains were revised down by a total of 66,000.
Friday's jobs report looked like what might be expected from an economy late in a jobs recovery, with fewer people out of work and less catch-up job growth needed, minus one factor: stronger wage growth.
While job gains have slowed notably to an average of 121,000 over the past three months, only about 50,000 to 100,000 new jobs are now needed monthly to keep the unemployment rate stable or falling, thanks to slower population growth.
Accordingly, Friday's report will likely not be enough, on its own, to dissuade chairwoman Janet Yellen and other Fed officials from their plans to tighten monetary policy this year by raising interest rates as early as June and later beginning shrinking the central bank's $4.5 trillion balance sheet.
"[T]his morning's job report confirms that the economy is continuing to head mostly in the right direction, with the unemployment rate at a very low 4.3 percent," noted Svenja Gudell, chief economist for the real estate database company Zillow.
In fact, the unemployment rate is now below the level that Federal Reserve officials reckon would signal a fully healthy economy, even as the jobs recovery shows few signs of stalling out as the economic expansion enters its ninth year.
And a broader rate of underemployment fell to 8.4 percent, the lowest level since November of 2007, the month before the recession officially began. The underemployment rate, referred to as the "U6" rate, takes into account not only the unemployed, but also people forced into part-time work and those only looking for jobs sporadically. During the worst of the crisis, it soared as high as 17 percent.
"The trend is very good. The trend is a trend we like a lot," said Trump economic advisor Gary Cohn, speaking in an interview on Bloomberg. "That said, we still think there is an awful lot we in the administration can do, and we are working on that."
In May, there were 6.9 million unemployed people. Since 2009, the ranks of the unemployed have thinned by 8.4 million, bringing the country close to what Fed officials have described as "full employment." At full employment, the thinking goes, there is little or no unemployment attributable to the business cycle. Instead, joblessness is accounted for by the normal hiring and firing and lifecycle transitions that take place no matter what.
Even so, the U.S. has been able to add enough jobs to keep unemployment falling in recent months in part by finding jobs not just for unemployed workers, but also for people who were not in the labor force at all.
Now, workers at the margins appear to be getting pulled into jobs, rather than forced out of the job search entirely, as millions were in the years following the crisis. Anecdotes suggest that employers in some part of the country are desperate to find people to fill positions. In Maine, for example, governor Paul LePage is weighing giving some prisoners conditional commutations to fill open jobs in the tourism industry for the summer, according to local press. In Northern Minnesota, one manufacturing company is letting workers set their own schedules to attract students and stay-at-home parents, and busing in people from distant cities, the Minneapolis Fed reports.
Friday's report showed labor force participation declining 0.2 percentage points to 62.7 percent, but that rate is basically unchanged since the fall of 2013. During that time, workforce participation has defied the ongoing aging of the population to remain steady, representing an increase of about 5.1 million people. In other words, favorable job prospects have buoyed labor force participation and allowed payrolls to continue growing robustly.
Nevertheless, tighter labor markets have yet to translate into the faster wage growth that Fed officials have long been seeking. Average hourly wages grew 2.5 percent on the year, in line with the gains of recent months.
One bright sector is mining. Mining jobs grew by 7,000 in May, and are up by nearly 50,000 since October. That represents a small recovery from the devastation to oil field employment over the past two years, which saw a loss of 245,000 mining jobs.
Health care, business support services, and restaurants also provided job growth in May.
Yet Friday's report also signaled that there is more trouble ahead in the retail sector, showing that 6,000 jobs were lost in May, for a total of 80,000 since January. "The prospect remains likely that we'll continue to see more job cuts there," said Mark Hamrick, senior economic analyst for Bankrate.com. The job losses represent "disruption" at brick-and-mortar stores that are losing employment because of competition from online sellers, but at the same time that will mean "opportunity for people who are empoyed elsewhere," such as distribution centers.