US hiring pullback suggests firms are straining to fill jobs

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Some 138,000 jobs were added to the US economy in May, according to the monthly jobs report released by the Bureau of Labor Statistics Friday morning.

But the labor force participation rate, or the share of working-age Americans who are employed or at least looking for a job, fell two-tenths of a percentage point to 62.7 percent.

Meanwhile, wage growth remained disappointing, with a 0.2 percent bump from last month and 2.5 percent year-over-year increase.

Friday's report showed payroll gains were revised down a net 66,000 in April and March.

The modest payrolls gain could temper expectations of a sharp acceleration in economic growth in the second quarter after gross domestic product increased at a tepid 1.2 percent annualized rate at the start of the year. Employers have added more than 2 million jobs in the past year, and a month or two of slow growth isn't unusual. It's now lost jobs for five months straight. The White House is preparing for a fight over raising the federal debt limit and approving government funding that, if not resolved, could rock the United States economy and global stock markets and cause the Fed to put its plans on hold.

But the Trump administration shook off concerns about the underwhelming report. That is far lower than previously reported, but sufficient to provide jobs to a growing population, if not to draw in dropouts.

The jobs report is a closely watched barometer of the U.S. economy and one of the metrics the USA central bank considers as it sets interest rates.

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"Companies may be taking a more cautious approach to hiring", said Nariman Behravesh, chief economist at IHS Markit.

February was the first jobs report during President Donald Trump's tenure, and since then the US economy has added 522,000 jobs. That figure is well below the 3 or 4 percent growth typical of earlier economic recoveries and throws into question the understood relationship between unemployment and pay (as one drops, the other typically rises). It's only when employers face a shallow pool of job applicants that they tend to feel compelled to raise pay in hopes of hiring people who fit their needs. Job growth in health care has averaged 22,000 per month thus far in 2017, compared with an average monthly gain of 32,000 in 2016.

This measure, however, does not account for those individuals who have dropped out of the labor force-it simply measures the percent of those who did not have a job but actively sought one over the month.

Meanwhile, the time needed to fill a job is now the longest in 17 years, Nariman Behravesh of IHS Markit said.

The May report from the U.S. Bureau of Labor Statistics has something for everyone: Good indicators, bad indicators, and a near-historic low in overall unemployment. This puts average job creation for the past three months at +120,667, this is well below where the three-month average stood last month due in no small part to the significant revisions for March and April.

Economists also believe that companies might be holding off hiring amid worries political scandals engulfing President Donald Trump could imperil his economic agenda, including tax cuts and infrastructure spending.

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