US job market weak in May, adding just 138,000 jobs

WASHINGTON - U.S. job growth came in below expectations in May, with employers adding just 138,000 jobs as the unemployment rate ticked down to 4.3 percent, federal economists reported Friday morning.

Average hourly earnings were up by 2.5 percent from the previous year to $26.22.

Economists surveyed by Bloomberg had expected an increase of 180,000 in non-farm payrolls.

As the economy continues to expand and reaches a point where nearly everybody who wants a job can find one - what economists call full employment - companies should have to start raising wages to attract new workers.

But although the U.S. economy has been adding jobs at a furious pace, workers still aren't seeing very rapid wage growth.

Economists are divided about what exactly is causing this, said Mark Zandi, chief economist at Moody's Analytics. Some believe the U.S. is not yet at full employment, because we are still not seeing a significant pickup in wage growth. Others, like Zandi, believe that the U.S. has reached full employment, but that wage growth is just lagging behind a bit, and will pick up in coming months.

The Beige Book, a compilation of detail on the economy from around the country that the Federal Reserve published Wednesday, contained plenty of those details. In New England, a semiconductor manufacturer reporting having to raise wages to fill vacant positions. In the area around Cleveland, a firm increased driver pay by 7.5 percent to retain drivers.

Most traders believe the Fed is highly likely to hike interest rates at its upcoming meeting on June 13-14. As of Thursday evening, traders saw a 91.2 percent chance of a rate hike.

The minutes from the Fed's May 2-3 meeting that were released this week showed that some central bankers were concerned that progress toward the Fed's inflation target had slowed. Yet most still judged that the Fed should hike rates 'soon” if economic data came roughly in line with their expectations.

A separate survey released Wednesday by ADP Research Institute and Moody's Analytics showed that private employers added 253,000 jobs in May. That figure was above economists' expectations, due in part to a strong showing from the professional services, education and health, and construction sectors.