Many companies say they are struggling to find enough workers to fill all their job openings as the unemployment rate has been at or below 4 percent for more than a year.
“Recession concerns are overblown,” said Gus Faucher, chief economist at PNC Financial Services. “There’s no indication the labor market is in trouble or the broader U.S. economy.”
Stocks fell Friday, with the Dow Jones industrial average shedding nearly 44 points. Many on Wall Street fear the good employment report might keep the Federal Reserve from cutting interest rates at its July meeting or compel the central bank to do a more modest reduction than many investors had hoped.
President Trump called the jobs news “unbelievable,” adding that “the military has a hard time getting people" because there is so much competition for workers.
Jobs gains were broad-based, with professional services, health care, construction, transportation and warehousing all experiencing large bumps in hiring. Manufacturing added 17,000 jobs in May, a notable increase after several months of little change. Many are watching manufacturing closely for signs of a trade war impact, and the latest data offer relief for the White House.
“Today’s jobs report shows the U.S. economy continues to create jobs at a strong pace even as we enter the longest period of economic expansion on record,” said Tony Bedikian, head of global markets at Citizens Bank.
The one yellow flag in the jobs report was wages. While companies say they have to raise pay and offer more perks to hire and retain workers, wage gains continue to be weaker in this expansion than they were in the 1990s boom.
Average hourly pay grew 3.1 percent in the past year, above the cost of living, but a bit weaker than economists were expecting. Wage growth was faster earlier this year — hitting 3.4 percent in February — and many experts predicted it would keep rising as it typically has in past upswings. But that has not materialized this spring and early summer.
“The lack of acceleration in wage growth suggests that this recovery is still incomplete. This is an important reminder that there are still workers who have not fully benefited from this recovery,” said Martha Gimbel, director of research at Indeed Hiring Lab.
The current expansion has been growing for more than a decade now, surpassing the prior record set during the 1990s business cycle. The economy has added jobs for a record 105 months.
President Trump and his team argue the economy is thriving and will continue to growth at a strong pace.
“Free market economic policies work and we are in an economic cycle that is going to continue,” Larry Kudlow, head of Trump’s National Economic Council, saidon Fox Business.
Many economists, including at the Fed, believe growth will moderate this year to about 2 percent, down from 3 percent last year as the effects of the GOP tax cut begin to wear off. But there was concern that Trump’s trade war could cause a more rapid deceleration, especially after business confidence slipped in recent weeks.
The worry is that if businesses were to pull back on hiring and investment, it would have widespread impacts on the economy. But there has been little sign of that so far.
“This looks like the 2016 economy. We have very solid job growth and little acceleration in wages,” Gimbel said.
The U.S. economy is driven mainly by consumer spending, which accounts for about 70 percent of growth. So far consumer confidence has stayed high and the expectation is that will continue as long as jobs are plentiful. Fed leaders have pointed out that consumer sentiment and spending remains a sign of strength right now.
“You’ve got workers in surveys say that jobs are plentiful. You’ve got wages going up. You’ve got high levels of household confidence. So all of that, underlying fundamentals for the consumer spending part of the economy . . . is quite solid,” Fed Chair Jerome H. Powell said in June.
Hiring is slowing slightly this year from the rapid gains of 2018, but experts widely expected job gains to moderate given how low the unemployment rate is and how long the expansion has been going.
“It is remarkable that companies continue to hire with abandon this late in the economic cycle as June marks the month where a full ten years have occurred since the end of the Great Recession,” said Chris Rupkey, chief financial economist at MUFG Bank. “The economic outlook must be bright for the second half of 2019 otherwise companies would never risk hiring additional help to produce their goods and sell their services.”
The economy has been adding 172,000 jobs a month, on average, this year versus 223,000 from last year. Still, the pace of job gains is almost double what is needed to stay ahead of population growth.