US employers add modest 138K jobs; job rate dips to 4.3 percent

"It would have taken a horrendous report today to make the Fed think twice about a June rate hike", said James Smith, developed markets economist at ING.

Friday's report showed payroll gains were revised down a net 66,000 in April and March. Monthly job gains have averaged 121,000 over the past three months, compared with 181,000 over the past 12 months. Job gains occurred in health care and mining.

Reversing an nearly two-year long trend in which the number of people looking for work had inched up, the labor force participation rate dropped by 0.2 percent in May, a discouraging note in a less than robust monthly report on unemployment. It has dropped five-tenths of a per centage point this year.

"T$3 he slight drop in the unemployment rate is due to would-be workers leaving the labor force, not getting jobs", Elise Gould, senior economist at the Economic Policy Institute, wrote on Friday. Employment in food services and drinking places also showed increases of 30,000.

Economists polled by Reuters had forecast payrolls increasing by 185,000 jobs last month and the unemployment rate holding steady at 4.4 per cent. The Fed had been widely expected to raise rates at its meeting later this month in an effort to keep inflation in check as the economy improves.

"This report, combined with other factors, including declines in auto sales, raises questions about the recent hawkish tone of Fed officials, who have hinted at potentially more rate hikes and a start of the process of balance-sheet shrinking this year", Duncan said.

Persistently sluggish wage growth could cast a shadow on further monetary policy tightening. "That's forcing them to increase compensation to stay competitive and hire temporary workers, but they are still having a hard time increasing prices to absorb the additional costs". Over the past year, average hourly earnings have risen by 63 cents, or 2.5%. More workers are needed to ease housing shortages, he said.

"The economy is starting to come back, and very, very rapidly", President Donald Trump said on Thursday, as he announced that the United States will withdraw from the Paris climate accord because it costs too much money and would kill millions of American jobs.

The Trump administration has designated the pace of hiring for good-paying skilled jobs in construction, manufacturing and mining as among the key categories it monitors for economic health. That number has been rising slowly over the past two years, an indication that more people in their prime working are optimistic enough to participate in the labor force.

One calendar quirk that may have depressed wage gains in May was that the 15th of the month - when workers who are paid semi-monthly get their checks - fell on the Monday after the survey week, which includes the 12th.

But losses in the retail sector continued, with payrolls falling by 6,100 over the month.

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