U.S. job growth surged in May, in a possible signal that last year's tax cuts are finally creating new jobs. The Labor Department reported 223,000 new jobs in May, and unemployment dropped to 3.8 percent, its lowest in 18 years.
But wage growth remained a sluggish 2.7 percent over the previous year, up from 2.6 percent in April, indicating that the tight labor market remains insufficient to deliver a significant pay boost for most workers.
President Donald Trump appeared to preview the unexpectedly high job growth in a morning tweet posted an hour before the number was made public by the Labor Department's Bureau of Labor Statistics. "Looking forward to seeing the employment numbers at 8:30 this morning," he tweeted at 7:21 a.m.
"You should have gotten the employment numbers from the Council of Economic Advisers yesterday," Jason Furman, chairman of President Barack Obama's White House Council of Economic Advisers, tweeted back in response. "And if this tweet is conveying inside information about a particularly good jobs number you should never get them in advance from the Council of Economic Advisers again."
The strong job growth prompted some skepticism that it will continue over the next few months. “It’s going to go lower,” says Mark Zandi, chief economist with Moody’s Analytics. “It almost feels inevitable.
Federal Reserve Governor Lael Brainard backed gradual rate hikes in a speech Thursday, hinting that the Fed believes unemployment might be bottoming out. “It is difficult to know how much slack remains“ in the labor market, she told attendees at the Forecasters Club of New York.
The employment numbers portray an economy that's still creating jobs at a brisk pace nine years into its recovery from the Great Recession and in spite of a tight labor market.
That could change as the U.S. renews its trade war with China. On Tuesday, the Trump administration moved forward with plans to impose tariffs on $50 billion of Chinese goods, an abrupt about-face for the White House just one week after Treasury Secretary Steve Mnuchin said the trade war was "on hold." And on Thursday, the White House moved to impose steel and aluminum tariffs on key trading partners like the EU, triggering threats of retaliation.
Labor force participation was unchanged from April’s 63 percent, still close to the lowest level since the 1970s. Economists expect unemployment to continue to fall over the course of the year, and labor force participation to increase as the economy tightens.