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Economic Watch: Unemployment Lowest in 16 Years as Trucking Jobs Dip

June 2, 2017

By Evan Lockridge

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U.S. job growth continued in May with unemployment hitting its lowest level in 16 years, likely paving the way for the Federal Reserve to hike interest rates again in a couple of weeks.

The Labor Department reported on Friday that 138,000 non-farm jobs were added, less than expectations of 185,000 jobs by Wall Street, but enough to push the unemployment rate down from 4.4% last month to 4.3%-- its lowest level since May 2001.

Despite this latest improvement, job creation has gotten weaker in recent months with the department revising April and March figures lower, resulting in job additions averaging just 121,000 over the past three months. Over the past 12 months, job additions have averaged 188,000 per month.

The for-hire trucking industry lost 100 jobs during May while the wider transportation and warehousing sector added 3,600, due largely to growth in rail transportation as well as transit and ground passenger transportation employment.

The report also showed average hourly earnings rose 0.2% in May, keeping the year-ago pace of wage growth at 2.5%.

Despite continued steady job growth in 2017, earnings have yet to break out of this mid-two percent pace. The softer inflation readings over the past couple months have likely weighed on nominal wage growth, according to John E. Silvia, chief economist at Wells Fargo Securities.

“On balance, average hourly and weekly earnings continue to improve and, along with more jobs, support the case for household income gains,” he said.

The government report follows one from the day before that showed there were 253,000 private sector job additions during May, up from a downwardly revised level of 174,000 in April, according to payroll processor ADP.

Commenting on the government report from Friday, Nathan Janzen, senior economist at RBC Economic said, “Slower employment growth has long been expected, though, as slack in labor markets is increasingly absorbed. In short, although the headline employment gain was weaker than expected, there is little in the details to suggest a fundamental weakening in labor markets that would prevent the Federal Reserve from hiking rates again in June.”

The central bank is meeting June 13 and 14 when it’s expected it will announce it is hiking interest rates by 0.25 of a percentage point, following an increase by the same amount in March.

According to Reuters, minutes of the Fed's May policy meeting, published the week before, showed while policymakers agreed they should hold off hiking rates until there was evidence the slowdown in overall economic growth this year was temporary, most agreed "it would soon be appropriate" to raise borrowing costs.

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