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Washington (AFP) – The US unemployment rate fell to its lowest level in 18 years in May, the Labor Department reported Friday, showing the world’s biggest economy remains robust even as it stands on the precipice of an all-out trade war.

The jobless rate fell to 3.8 percent from 3.9 percent in the prior month, the lowest level since April 2000.

With a shortage of workers reported throughout the country and across many industries and skill levels, the latest data confirmed wages are rising.

The economy added 223,000 non-farm jobs last month, stronger than the consensus forecast of economists, and better than the increase of 159,000 in April.

And the jobless rate for black or African American workers dropped sharply in the month to 5.9 percent from 6.6 percent, the lowest since the government began keeping records in 1972. 

President Donald Trump has been touting that figure as a major accomplishment of his economic policies.

“We have reached yet one more historic milestone with 3.8 percent unemployment just announced, and another all-time record low African-American unemployment,” Trump said at an event shortly after the data were released.

“We’re very honored by that. And by way, for the women out there, the lowest unemployment in 19 years.”

However, the pool of available workers — defined as those working or actively looking for work — continued to decline, which was the main driver behind the lower unemployment rate. 

– Trump breaks protocol –

Trump broke with protocol by tweeting about the report an hour before release time, hinting the figures would be positive.

“Looking forward to seeing the employment numbers at 8:30 this morning,” he said on Twitter.

The data are kept strictly confidential and subject to tight security to prevent early release since investors worldwide are waiting to trade on the information. 

The report is given to the White House a day in advance, although officials never hint at the contents.

White House economic adviser Larry Kudlow confirmed he told Trump about the data Thursday night, but noted that the tweet did not reveal any information.

“He didn’t give any numbers,” Kudlow said.

By law, no government officials can comment on the jobs report until one hour after release, something Trump administration officials have done on various occasions.

Markets did not appear to react to the tweet ahead of release time, but were delighted afterwards. 

US stocks surged after the opening bell, and mostly continued upward, with the tech-rich Nasdaq gaining 1.25 percent. The Dow, however, was off its highest point of the session.

– Inflation pressures? –

With robust hiring continuing — well beyond the monthly average of 179,000 for the past three months — employers have been reporting the need to increase salaries and benefits to attract workers and keep them from being poached by competitors.

The report shows average hourly earnings rose 0.3 percent last month to $26.92, which is 2.7 percent higher than a year ago.

With wage gains finally above the Federal Reserve’s two percent inflation target, the central bank will be watching carefully to see if rising salaries translate into accelerating price increases.

However, the Fed signaled clearly that it is willing to tolerate inflation slightly above two percent for a short period.

The central bank is widely expected to raise the benchmark lending rate at its meeting later in June, the second increase of three or four expected this year.

Ian Shepherdson of Pantheon Macroeconomics said the data were very strong and would impact the Fed’s decisions.

“The Fed will hike four times this year,” he said.

– Hiring trending up –

Hiring was strong across multiple sectors, although there was a slowdown in manufacturing — contrary to Trump’s repeated claims that the industry is adding workers due to last year’s tax cuts and his trade policies, which include steep tariffs on aluminum and steel.

The manufacturing sector added 18,000 workers, the least since September 2017, retailers added 31,000, while health care rose 29,000 and construction 25,000.

Ben Herzon of IHS Markit said the labor market “is tightening rapidly” — meaning the jobless rate is likely to fall further.

“Nearly all aspects of this report were positive and consistent with solid growth of wage-and-salary income in the second quarter,” Herzon said. 

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