The US economy produced 138000 new jobs last month (May), considerably fewer than the 180000 positions that analysts had been anticipating. It will undoubtedly be factored into the June Federal Reserve meeting as it considers a further tightening of US interest rates – weaker job creation data would be considered as a factor arguing against a rate rise now, but as US employment is close to “full” employment, this may not carry much weight. With that said, fuller data revealed that March and April job creation figures were lower than originally estimated.
Perversely, US unemployment fell by a further 0.1% to stand at
4.3% in May, despite the weaker job creation data. Currently, official US unemployment is the lowest seen since 2001 according the US Labor Department. To put the May job creation figure of 138000 in perspective, the average monthly job creation figure stands at 181000 over the past calendar year.
Wage growth over the past year came in at 2.5%, taking average hourly workings to $26.22; this is above the 2.2% inflation figure for the year to April.
The US workforce is expanding at a rate of 0.5% per annum and it is expected that it will reach 163.8 million by 2024. Owing to a decline in the birth rate and a drop-off in migration to the USA, the age of the workforce, on average, is increasing. The workforce in the USA is set to increase by an average of 7.9 million over the next eight years.
Currently, the US interest rate stands at 1% which is well below the historical average figure of 5.8%. The Federal Reserve wants to normalise the rate such that it has room for manoeuvre when the next cyclical recessionary wave strikes.