Business

US adds fewer jobs than expected

A doctor and patient Image copyright Joe Raedle/Getty
Image caption Health care employers showed among the strongest growth in May

US employers added fewer jobs than expected in May, but the unemployment rate dipped further as the economy headed toward full employment.

The unemployment rate last month was 4.3%, falling a 10th of a percentage point to its lowest level since 2001, the US Labor Department said on Friday.

But payrolls increased by just 138,000. Economists had expected growth of more than 180,000.

Official job creation figures for March and April were also revised down.

The jobs report is a closely watched barometer of the US economy and one of the metrics the US central bank considers as it sets interest rates.

A number of reports have shown that US growth in the first quarter was weak. Federal Reserve officials have said they are monitoring the figures, but believe the slowdown is temporary.

Some slowdown in job creation has been expected, as the labour market heads deeper into one of the longest expansions in US history.

But the 138,000 jobs added in May marked a sharp deceleration from the average monthly gain of 181,000 over the previous 12 months.

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Job creation kept pace with population growth in May, but it was not what financial markets were expecting, said Paul Diggle, senior economist at Aberdeen Asset Management.

"Today's numbers probably won't stop the Fed from raising rates next week. But they might well influence what happens next," he said.

"If wage growth doesn't improve, the Fed is going to want to soften its stance on how many rate rises are to come this year and next."

Private sector employers added 147,000 jobs over the month, led by the professional and business services, health care, and leisure and hospitality sectors. Construction and mining payrolls also rose.

But losses in the retail sector continued, with payrolls falling by 6,100 over the month. Government was also a drag on job creation, with 9,000 fewer positions. Employment in manufacturing also dipped.

The decline in the unemployment rate came as the number of people outside the labour force - neither working nor looking for work - increased in May. The labour force participation rate was 62.7%, retreating from earlier this year.

The revisions to March and April, which come as the Labor Department receives more detailed information, also meant there were about 66,000 fewer gains over the two months than previously reported.

'Disappointing'

Gus Faucher, senior economist at PNC Financial Services, called Friday's report "disappointing". He said some of the slowdown came as some employers had trouble finding workers with the right skills.

Wages are up, but not as much as might be expected, he added.

Average hourly earnings were $26.22 last month, rising 2.5% over the year.

But economists at Moody's Analytics said the soft jobs number in May might omit summer hiring that occurred later in in the month. They wrote that they expected to see future gains, even if the overall pace of expansion slows.

"Because of the peculiarities inherent in the May report, we are minimising its importance," they wrote. "There are few risks on the horizon that suggest that the economy is at risk of downturn."

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