U.S. job growth accelerated in May and the unemployment rate dropped to an 18-year low of 3.8 percent, pointing to rapidly tightening labor market conditions, which could stir concerns about inflation.
The closely watched employment report on Friday also showed wages rising solidly last month, cementing expectations that the Federal Reserve will raise interest rates in June.
Nonfarm payrolls increased by 223,000 jobs last month, the Labor Department said. Data for March and April was revised to show the economy creating 15,000 more jobs than previously reported. Economists blamed bad weather for the slowdown in job growth over those two months.
Average hourly earnings rose eight cents, or 0.3 percent last month after edging up 0.1 percent in April. That lifted the annual increase in average hourly earnings to 2.7 percent from 2.6 percent in April.
The one-tenth of a percentage point drop in the unemployment rate pushed it to a level last seen in April 2000. The jobless rate is now at the Fed’s forecast of 3.8 percent by the end of this year.