US unemployment falls to 3.8% in May, lowest in 18 years

People are seen walking in the 5th Avenue, in New York City, on May 11, 2018.
People are seen walking in the 5th Avenue, in New York City, on May 11, 2018.PHOTO: AFP

WASHINGTON (AFP) - The US unemployment rate fell to its lowest level in 18 years in May as hiring was far stronger than expected and the size of the workforce continued to shrink, the government said on Friday (June 1).

With a shortage of workers reported throughout the country and across many industries and skill levels, the latest data confirmed wages are rising.

The jobless rate fell to 3.8 per cent from 3.9 per cent in April, the lowest level since April 2000, the Labor Department reported.

The economy added 223,000 non-farm jobs last month, stronger than the consensus forecast of economists, and better than the increase of 159,000 in the prior month.

However, the pool of available workers - defined as those working or actively looking for work - continued to decline, with the participation rate falling to 62.7 per cent, the report said.

The size of the labour force and the participation rate influences the direction of the unemployment rate.

Even so, the jobless rate for black or African American workers dropped sharply in the month to 5.9 per cent from 6.6 per cent, the lowest since the government began keeping records in 1972.

President Donald Trump has been touting that figure as a key accomplishment of his economic policies.

With robust hiring continuing - well beyond the monthly average of 179,000 for the past three months - employers have been reporting the need to increase salaries and benefits to attract workers and keep them from being poached by competitors.

The report shows average hourly earnings rose 0.3 per cent last month to US$26.92.

Hiring was strong across multiple sectors, although there was a slowdown in manufacturing - contrary to Trump's repeated claims that the industry is adding workers due to last year's tax cuts and his tough trade policies, which have imposed steep tariffs on aluminium and steel.

The manufacturing sector added 18,000 workers, the least since September 2017, retailers added 31,000, while health care rose 29,000 and construction 25,000.