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

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

WASHINGTON - Job growth slowed sharply in May to just 138,000, the Labor Department said Friday, an unexpectedly lackluster figure that raises concerns about the labor market but probably not enough to derail an expected Federal Reserve interest rate hike this month.

The decline in the unemployment rate-while a sign of a tightening job market- was also due to a drop in the size of the labour force, as the number of people classified as employed and unemployed fell by roughly the same amount.

The unemployment rate fell as participation in the labour force also declined, to 62.7% of people that are either working or job hunting, from 62.9%. Average hourly earnings are forecast rising 0.2 percent in May after gaining 0.3 percent in April.

With revisions to March and April's job totals that show 66,000 fewer jobs created than initially reported, the three-month average swooped down to 121,000.

While the number of new jobs created in May was below the 180,000 that economists had been expecting, the United States has now added jobs for 80 consecutive months. Economists surveyed by Bloomberg say that growth could tick up slightly in May, to an annual increase of 2.6 percent. Retailers trimmed their ranks by 6,100 jobs.

But with the labour market expected to hit full employment this year, there is optimism that wage growth will accelerate. For those who think the economy is close to capacity, last month's gains were solid. Healthcare and social assistance providers increased their payrolls by 32,300 after a 44,900 gain in April. It has rebounded from a multi-decade low of 62.4 percent in September 2015 and economists see limited room for further gains as the pool of discouraged workers shrinks.

Maibach said hourly wages have increased only a bit, but some workers are earning 10 percent to 25 percent more a week as the company takes on more work. The rate has been trending near the lowest levels in since the 1970s, a time when women were entering the labor force in larger numbers.

Meanwhile, the National Federation of Independent Business (NFIB) reported higher job creation among its members in May, according to the NFIB Jobs Report released June 1. Data on consumer spending and manufacturing suggest the economy gained speed early in the second quarter after gross domestic product increased at a tepid 1.2 percent annualized rate at the start of the year.

The unemployment rate is expected to have remained in May at 4.4 percent, a low figure that historically has reflected a healthy job market.

Many economists believe that wage growth is right around the corner. The health care overhaul the administration favors is being reworked in the Senate.

Pay gains may be weak in part because one crucial ingredient for economic growth - worker productivity - has been sluggish.

At their May meeting, Fed officials indicated that they were ready for another small increase if the economy strengthened after a sharp slowdown in growth over the winter that their official policy statement said was "likely to be transitory". The jobless rate for Asians was 3.6 percent, for Hispanics 5.2 percent and for blacks 7.5 percent.

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