Unemployment Still Near Historic Low; Robust Wage Growth Continues in May

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May’s Employment Situation Report highlighted the historically low unemployment rate, which remained at 3.6 percent in May—matching the lowest rate in almost 50 years (since 1969). This marks the 15th consecutive month where the rate has been at or below 4 percent. In addition the unemployment rate for Hispanics remained at 4.2 percent—matching the lowest rate since the series began in 1973.  Among African Americans, the unemployment rate fell by 0.5 percentage points to 6.2 percent, nearing the historic low of 5.9 percent. The unemployment rate for those with some college or an associate degree declined by 0.3 percentage points to 2.8 percent—the lowest rate since March 2001. The unemployment rate for high school graduates who did not attend college remained at 3.5 percent, matching the lowest since July 2000. The U-6 unemployment rate, the broadest measure produced by Bureau of Labor Statistics (BLS) of unemployment and underemployment, reached 7.1 percent—the lowest rate since December 2000 as shown in the figure below.

Wages continued to rise in May as well. Nominal average hourly earnings rose by 3.1 percent over the past 12 months—the 10th straight month that year-over-year wage gains were at or above 3 percent. Prior to 2018, nominal average hourly wage gains had not reached 3 percent since April 2009.

Real wages (taking inflation into account) are also growing. Based on the most recent Personal Consumption Expenditures (PCE) price index data from April, inflation in the past year was 1.5 percent, and based on the most recent Consumer Price Index (CPI-U) price data from April, inflation in the past year was 2.0 percent (May inflation data is not yet available for either series).  If inflation does not change in May, using the PCE price index, real wages are growing about 1.6 percent, or nearly $900 per year for someone working 40 hours per week all year at the average wage rate. For a family with two full time workers at this wage, this represents an increase of nearly $1,800 per year.

Looking at the Employment Situation Report, the economy added 75,000 jobs in May, and continued the streak of over 100 straight months of job gains. The average jobs growth in the past 12 months was a healthy 196,000 jobs and remains above the 2017 annual average of 179,000 jobs per month.  The economy has added over 5.8 million jobs since the election.

Even though the payroll employment growth fell short of expectations, one month does not make a trend.  Furthermore, the totality of this month’s jobs report—including strong wage growth, low unemployment rate, and the continuation of the longest consecutive streak of jobs gains—reflects the continued growth and strength of the United States labor market. Sustaining continued job growth with near record low unemployment will require bringing more individuals off the sidelines. Programs like the Pledge to America’s Workers, which will provide roughly 9 million new education and training opportunities over the next 5 years, are key tools for the continued health of the U.S. labor market.

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