WASHINGTON _ Job growth slowed sharply in May to just 138,000, the Labor Department said Friday, an unexpectedly lackluster figure that could give Federal Reserve officials concern about enacting another interest rate hike this month.
The unemployment rate ticked down a tenth of a percentage point to 4.3 percent, the lowest since 2001. But that was largely for the wrong reason: About 429,000 people dropped out of the labor force.
The percentage of working-age Americans in the labor force declined last month to 62.7 percent, the third-straight monthly decline and near a four-decade low.
May's job growth was down from 174,000 the previous month. The April figure was revised down from an initially reported 211,000.
Combined with a downward revision of 29,000 for March, the economy now has averaged a gain of just 121,000 net new jobs in the last three months. In 2016, the average was 187,000 a month.
Economists had expected job gains of about 185,000 in May.
There also was discouraging news on wages.
Economists have expected wage gains to increase as the job market got tighter, but average hourly earnings increased just four cents in May to $26.22. That was compared with a 5-cent gain in April, a figure that was revised down from the initial estimate of 7 cents.
For the 12 months ended May 31, wages have risen 2.5 percent. That was only slightly above the 2.2 percent annual increase in the consumer price index.
Construction companies increased their payrolls by 11,000 in May after shedding 1,000 positions the previous month. But job growth in May was down across many key sectors.
Manufacturing was a mirror image of construction. Factories reduced their payrolls by 1,000 in May after adding 11,000 net new jobs the previous month.
Retailers continued to struggle, shedding 6,100 net jobs after a 5,800-position reduction in April. Government payrolls shrank by 9,000 in May after adding 1,000 net positions the previous month.
The leisure and hospitality industry added 31,000 net new jobs in May, down from 58,000 the previous month. Healthcare and social assistance providers increased their payrolls by 32,300 after a 44,900 gain in April.
The jobs report was the last major economic indicator to be released before Federal Reserve monetary policymakers gather in Washington on June 13 to decide whether to raise their key short-term interest rate.
At their May meeting, Fed officials indicated that they were ready for another small increase if the economy strengthened after a sharp slowdown in growth over the winter that their official policy statement said was "likely to be transitory."
Two days after that meeting, the Labor Department reported that job growth had rebounded strongly in April. But the May jobs report injects some uncertainty into the decision concerning the small rate hike that investors have been expecting would come this month.
Weak consumer spending had been another factor in the economy's lackluster first-quarter performance, but this week the Commerce Department reported that the second quarter got off to a solid start as Americans ratcheted up their spending at the fastest pace in four months.
