Unemployment Rate Falls to 16-Year Low, But Hiring Slows

U.S. added 138,000 jobs in May as jobless rate falls to 4.3%

The unemployment rate fell to its lowest level in 16 years in May, a fresh sign the slow and long-running U.S. economic expansion has entered a new stage that has left businesses struggling to find qualified workers.

At 4.3%, the jobless rate is at point it hasn’t seen since May 2001, the Labor Department said Friday, and is below the trough it reached in the previous economic expansion, from 2001 to 2007.

Job creation, though, has cooled. Employers added a seasonally adjusted 138,000 jobs from the prior month. After a robust start to the year, the economy has added an average 121,000 jobs over the past three months. That is about two-thirds of the growth rate recorded last year.

The drop in unemployment suggests the labor market is at or near full employment—a point where most workers who are seeking a job can find one in short order and those who are unemployed are part of the natural churn. Federal Reserve officials see a higher jobless rate over the long run, between 4.7% and 5%. A jobless rate below this mark suggests pressures are building on employers to cope with the problem of finding qualified workers.

That possibly explains the slowdown in hiring. Some business say they are adding workers more slowly and accepting less growth than they might otherwise achieve, while others are adjusting pay scales, boosting overtime shifts or accepting higher turnover.

“Job openings are near all-time highs,” said Beth Ann Bovino, chief U.S. economist for S&P Global Ratings. “It suggests that businesses are struggling to fill these positions in an increasingly tighter market.”

“There’s a real shortage of available workers, especially in skilled trades” such as carpenters and plumbers, said Barton Malow President Ryan Maibach.

Mr. Maibach said hourly wages have increased only a bit, but some workers are earning 10% to 25% more a week due to increased overtime hours as the company takes on more work.

“Trying to find an additional 15 or 20 people is no small feat,” he said.

Problems like his pose a conundrum. A high-pressure job market ought to push wages up more, as employers compete for labor. Despite some pickup from low levels early in the expansion, however, wage growth remains relatively lackluster.

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