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Slower hiring, lower unemployment offer mixed U.S. labour signs

The. U.S. unemployment rate is at its lowest level in 16 years, even as job growth slowed in May.

The Labor Department said Friday that the unemployment rate fell to 4.3 percent from 4.4 percent. Average wages rose 0.2% in May to $26.22 an hour, the government said Friday.

Job gains in March were revised down to 50,000 from 79,000 while April's figures were also lowered to 174,000 from 211,000. "The average over the past three months now stands at just 120,000, well below last year's average pace of about 180,000". And indeed, with unemployment at a near-historic low, wages are bound to rise.

Almost 80,000 retail jobs have been lost since February, according to the latest figures, and a dozen chains have announced closing or bankruptcy, including Rue21, BCBGMaxAzria, Payless, Wet Seal and H.H.Gregg. "If the participation rate just stabilizes from here for a time, then job growth consistent with a stable unemployment rate is only about 100,000 a month", he said.

Government employment decreased 9,000 last month.

The modest payrolls increase could raise concerns the economy was struggling to gain speed after growth slowed in the first quarter. Jim O'Sullivan who is working as a chief U.S economist at High-Frequency Economics told the CNN, "I don't think there's any reason to expect hiring will hit a wall". 608,000 people dropped out of the labor force between April and May.

As it has done in recent months, the White House once again hailed the good news in the labour market.

Even with the disappointing job growth, analysts have suggested the Federal Reserve is still likely to raise interest rates later this month. Since January, the unemployment rate has fallen by a half a percentage point and the number of unemployed has declined by 774,000.

Congress is already trying to pass comprehensive health care reform, with the Senate expected to write its own bill.

"Companies may be taking a more cautious approach to hiring, not because they are anxious about sales, but because they are trying to assess whether the president and Congress will be successful in passing pro-growth policies", Behravesh wrote in a client note.

Minutes of the Fed's May 2-3 policy meeting, which were published last week, showed that while policymakers agreed they should hold off hiking rates until there was evidence the growth slowdown was transitory, "most participants" believed "it would soon be appropriate" to raise borrowing costs.

To some economists, these trends suggest that the economy is already well on its way to providing some kind of a job for almost all Americans who are willing and able to work. The falling unemployment rate, flat participation rate and slowing job growth could all be signs that the job market is nearing the point where it can't get much better - what economists call "full employment".

Fed officials indicated last week a rate hike would be likely if the economy stayed on track. In the area around Cleveland, a firm said it increased driver pay by 7.5 percent to retain drivers. "The lack of more substantial inflation also argues against a future trajectory of aggressive rate hikes".


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