S unemployment falls nearly to 1969 levels; hiring is solid
Washington – Another month of strong hiring drove the nation’s unemployment rate down to 3.8 per cent – tantalizingly close to the level last seen in 1969, when Detroit still dominated the auto industry and the Vietnam War was raging.
Employers added 233,000 jobs in May, up from 159,000 in April, the Labor Department reported Friday. And unemployment fell to an 18-year low.
The report shows that the nearly nine-year-old economic expansion – the second-longest on record – remains on track and may even be gaining steam. Employers appear to be shrugging off recent concerns about global trade disputes.
“The May jobs report revealed impressive strength and breadth in U.S. job creation that blew away most economists’ expectations,” said Scott Anderson, chief economist at Bank of the West.
With the unemployment rate so low, businesses have complained for months that they are struggling to find enough qualified workers. But Friday’s jobs report suggests that they are taking chances with pockets of the unemployed and underemployed whom they had previously ignored.
Roughly an hour before the employment data was released, President Donald Trump appeared to hint on Twitter that a strong jobs report was coming. “Looking forward to seeing the employment numbers at 8:30 this morning,” he tweeted.
The president is normally briefed on the monthly jobs report the day before it is released, and he and other administration officials are not supposed to comment on it beforehand.
Larry Kudlow, the president’s top economic adviser, downplayed Trump’s tweet.
“He didn’t give any numbers,” Kudlow said. “No one revealed the numbers to the public.”
Investors welcomed the report. The Dow Jones industrial average rose 227 points, or 0.9 per cent, in afternoon trading. Other indexes also moved higher.
The healthy jobs data makes it more likely that the Federal Reserve will keep raising interest rates this year – two and possibly three more times, after doing so in March.
Unemployment dropped from 3.9 per cent in April. When rounded to one decimal, as the Labor Department typically does, the official jobless rate is now the lowest since April 2000.
But the unrounded figure is 3.75 per cent, the lowest since December 1969.
Unemployment remained below 4 per cent for nearly four straight years in the late 1960s, but it rose to 6.1 per cent during a mild recession in 1970. It didn’t fall below 4 per cent again until the dot-com-fueled boom of the late 1990s.
Businesses desperate to hire are reaching deep into pools of the unemployed to find workers. Unemployment among high school graduates fell sharply to 3.9 per cent, a 17-year low. For black Americans, it hit a record low of 5.9 per cent.
And the number of part-time workers who would prefer full-time jobs is down 6 per cent from a year ago. That means businesses are converting some part-timers to full-time work.
Companies are also hiring the long-term unemployed – those who have been out of work for six months or longer. Their ranks have fallen by nearly one-third in the past year.
That’s important because economists worry that people who are out of work for long periods can see their skills erode.
Those trends suggest that companies, for all their complaints, are still able to hire without significantly boosting wages. Average hourly pay rose 2.7 per cent in May from a year earlier, below the 3.5 per cent to 4 per cent pace that occurred the last time unemployment was this low.
The number of involuntary part-time workers is still higher than it was before the 2008-09 recession.
Martha Gimbel, director of economic research at Indeed, the job-listing site, said some of the fastest-growing search terms on the site this year are “full-time” and “9-to-5 jobs,” evidence that many people want more work hours.
“That suggests there is still this pool of workers that employers can tap without raising wages,” Gimbel said.
Debbie Thomas, owner of Thomas Hill Organics, a restaurant in Paso Robles, California, said that finding qualified people to hire is her biggest challenge. She has raised pay by about a dollar an hour in the past year for cooks and dishwashers but is reluctant to go much higher.
“You don’t want to price yourself out of the market,” Thomas said.
The job gains in May were broad-based: Professional and business services, which include higher-paying fields such as accounting and engineering, added 31,000 jobs.
Health care, a consistent job engine, gained nearly 32,000.
Manufacturing, which is benefiting from increased business investment in machinery and other equipment, added 18,000 jobs, and construction 25,000.
Some economists remain concerned that the Trump administration’s aggressive actions on trade could hamper growth. The administration on Thursday imposed tariffs on steel and aluminum imports from key allies in Europe, Canada and Mexico. Earlier in the week, it threatened to hit China with tariffs on $50 billion of its goods.
Still, consumer spending rose in April at its fastest pace in five months. And companies are also stepping up spending, buying more industrial machinery, computers and software – signs that they’re optimistic enough to expand. A measure of business investment rose in the first quarter by the most in 3 1/2 years.
Macroeconomic Advisers, a forecasting firm, said it now foresees the economy expanding at a robust 4.1 per cent annual pace in the April-June quarter, which would be the fastest in nearly four years. The economy expanded just 2.2 per cent in the first quarter.