The unemployment rate dropped to a 16-year low in May, even though job creation fell short of expectations.
The jobless rate fell to 4.3 percent from 4.4 percent — the lowest level since May 2001 — and the U.S. economy added 138,000 jobs in May, below expectations as the labor market tightens, the Labor Department reported on Friday.
House Ways and Means Committee Chairman Kevin Brady (R-Texas) said the data shows that an overhaul of the tax code is critical for more robust jobs and economic growth.
“While jobs are being created, too many hardworking families are not seeing their paychecks increase because of a slow-growing economy,” Brady said in a statement.
“As our committee has heard from business leaders over the past few weeks, permanent, pro-growth tax reform is the most important opportunity we have to help job creators hire more workers, increase paychecks and reinvest in our local communities,” Brady said.
Economists had projected about 185,000 jobs and expressed disappointment in the latest figures that show 60,000 fewer jobs than expected in March and April.
“Job growth in May was soft and there were downward revisions to job growth in March and April as well,” said PNC economists Gus Faucher and Stuart Hoffman.
Jobs for March and April were 66,000 fewer than previously reported. March jobs fell to 50,000 from 79,000 while April’s total dropped to 174,000 from 211,000 jobs.
“Some of this is due to businesses finding it more difficult to locate workers with the right skills as the labor market gets tighter,” Faucher and Hoffman said.
“If this remains the case, job growth will stay at this slower pace throughout 2017,” they said.
Even with the tightening labor market, wage growth is still slower than expected considering the low unemployment rate — with only 2.5 percent growth over the past year.
“After more than 130 days in office, President Trump has yet to show us he is serious about creating jobs and raising wages across the country,” said Sen. Martin Heinrich (D-N.M.), ranking member of the Joint Economic Committee.
“Rather, he has pushed for policies that will only hinder economic growth: a disaster of a healthcare plan that will kick millions off their health insurance, a budget that threatens working families, and reckless practices by his administration that only endanger the economic security of every American while he benefits,” Heinrich said.
The Hill added:
“Still, job gains averaged 121,000 over the past three months, well above the 80,000 needed to lower the jobless rate.
Douglas Holtz-Eakin, head of the American Action Forum, said that while the unemployment rate fell, the report’s household survey showed that employment fell by 233,000.
In addition, the labor force dropped by 429,000 and labor force participation, which has been hovering near 40-year lows, dropped to 62.7 percent from 62.9 percent.”
But Mark Hamrick, Bankrate.com’s senior economic analyst, said that Trump “vastly overstated jobs creation since he took office and the assessment has only worsened with the arrival of a new day and the latest employment report.”
Wage growth and the falling unemployment rate, which mostly fell because of a reduction in the labor force, weren’t the expected bright spots.
“The wage component of the report continues to serve as a damper, in the sense that it remains subpar for an economy widely regarded as being close to full employment,” Hamrick said.
After five months of growth, manufacturers shed 1,000 jobs last month.
“The loss of manufacturing jobs in May is a stark reminder of the challenges that face factory workers: declining auto sales, a persistently high goods trade deficit and muddled fiscal policies,” said Alliance for American Manufacturing President Scott Paul.
Retailers, which have been struggling the past few months, lost 6,100 jobs in May.
“We’ve seen a seesaw of gains and losses in retail employment over the past several months, reflective of the ongoing transformation of our industry,” said Jack Kleinhenz, chief economist of the National Retail Federation.
“While we are looking for a new equilibrium in retail employment, it will take time for the industry to adjust to rapid changes in consumer spending habits and demographic patterns,” Kleinhenz said.