The U.S. economy added more jobs than expected in May and the unemployment rate dropped slightly to 3.8 percent, remaining at its lowest level in decades.
The economy added 223,000 new jobs, according to data released Friday by the Labor Department, a significantly higher number than the 190,000 new jobs analysts had predicted in a recent Bloomberg survey.
“It’s pretty hard to argue with this jobs report,” said Dan North, the chief economist at Euler Hermes North America. The numbers are “great all around,” he added, with growth evenly spread across the economy.
Here are the top takeaways from the May jobs report:
- Growth across sectors: Employers added jobs in multiple key sectors, including health care (29,000 jobs), construction (25,000), transportation (19,000) and manufacturing (18,000). Retail also added 31,000 jobs, a better-than-expected result at a time when many brick-and-mortar stores face rising competition from online businesses.
- Unemployment rate ticks down: The unemployment was 3.8 percent, down from 3.9 percent in May. The last time the unemployment rate was this low was in 1969. But the labor force participation rate remained essentially unchanged at 62.7 percent, compared to 62.8 percent in May.
- ‘Mismatches on the ground.’ The unchanged labor participation rate is a reminder that many Americans who want work remain discouraged and are not searching for jobs, Cathy Barrera, the chief economist at the online job marketplace ZipRecruiter, wrote in an email. “While there is a good deal of competition for talent, there continue to be mismatches on the ground, where some employers are having a hard time filling roles and some job seekers are having a hard time finding good jobs near them.”
- Wage growth poised for takeoff? Average hourly earnings increased by 8 cents. Over the year, wages are up 2.7 percent. Economists said that was lower than they’d hoped during an economic expansion, but there are signs wages could start growing faster in the coming months. “We’re on the precipice of some improvement,” said Andrew Chamberlain, the chief economist at Glassdoor Economic Research. “If the unemployment rate continues to burn at this low level, it’s just a matter of time before more pockets of labor shortages show up and that translates into wage gain.”
- Interest rates hikes coming: The Federal Reserve will likely raise the benchmark interest rate at its meeting later this month, and is expected to raise rates at least once more later this year. “This month surely is a lock. Two overall [rate hikes] are a lock, and I still think there’s a case for three,” North said.