May jobs report: Unemployment down to 3.8%, payrolls up by 223,000

Businesses hired robustly in May, reversing the slowing trend of the preceding two months, the Labor Department reported Friday. Here's what you need to know.

Some 223,000 jobs were added. This beats economists' expectations of about 190,000 jobs added, and reverses the somewhat disappointing growth over the previous two months (155,000 jobs added in March and 159,000 in April, after revisions.)

Unemployment dropped to 3.8 percent, its lowest figure in 18 years. The unemployment rate is now solidly below what most economists consider sustainable in the long term, and is likely to keep falling, some analysts say.

"You have to go back to 1969 to find an unemployment rate lower than May's, and with job growth running much faster than the rate of increase of the labor force - participation remains resolutely flat - unemployment is set to keep falling," Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a note. 

The labor force grew modestly in May and labor force participation stayed flat. 

The president hinted ahead of the release the numbers would be positive. President Donald Trump tweeted at 7:21 a.m. ET that he was "looking forward to seeing the employment numbers at 8:30 this morning." It is highly unusual for a president, who is briefed on the report ahead of time, to telegraph whether it will be positive before its release. 

Wages grew somewhat faster, increasing 2.7 percent year-over-year. That beats the middling wage growth of about 2.5 percent seen so far in this economic cycle. Other evidence also shows workers are getting hired faster. Among hourly employers, who make up about half of all jobs, one-quarter are getting filled in the same day, according to Peter Harrison, CEO of job-search site Snag.

"The speed with which employers need to respond has changed a lot in the past year or year and half," he said. "In the past, employers would probably dip into their applicant pool once a week. Now they find that if they don't get back to workers within 24 to 48 hours, those workers have moved on." 

Black unemployment dropped to 5.9 percent, the lowest figure on record. That figure is usually double the unemployment rate for whites. It was 6.6 percent last month, also a record low at the time.

Unemployment also dropped for less-educated groups. The unemployment rate for those with less than a high-school degree is now 5.4 percent, while unemployment for high-school grads is below 4 percent.  

"People with high school degrees or less than a high school diploma have been doing quite well in recent months," said Cathy Barrera, chief economist at ZipRecruiter. "Over the past year they have been rebounding faster than people with some college or with a college degree."

"At the same time, that means that the jobs being added are sort of on the lower end of the pay scale, so that dampens overall wage growth," she added.

An imminent interest-rate hike appears almost certain. The Federal Reserve seems set to increase interest rates another quarter-point at its June 12-13 meeting, and some analysts are predicting that this year will see a total of four hikes instead of three.