The drop in the unemployment rate may be partly explained by a contraction in the labor force last month. Still, the jobless rate is reaching historically low levels. In the last 60 years, there has been only one sustained period where unemployment stayed below 4 percent: the late 1960s.
Ms. Barrera said it was too early to worry about whether the economy is overheating. When the jobless rate hit these levels right before the dot-com bubble burst, the labor-force participation rate was significantly higher than it is today.
“It’s easy to try to analogize and say that’s what we should preparing ourselves for right now,” Ms. Barrera said. That kind of thinking might prompt some employers to cut back on investments or hiring, which could begin to slow growth.
President Trump’s flirtation with a trade war has thrust uncertainty into the overall economic picture. The White House has offered little clarity about whether its newly imposed steel and aluminum tariffs will extend to allies like Mexico, Canada and the European Union, and it seems no closer to smoothing over economic tensions with China.
Economists say it is too soon to tell how employers may change their staffing or expansion plans in response to the tariffs on Chinese goods, or to Beijing’s retaliation. But there are signs that companies that buy metals are feeling the effects already. The Institute for Supply Management said this week that manufacturing activity grew in April at its slowest pace since last July.
Uncertainty over the price of raw materials could prompt factories to cut back from their recent hiring spree. Manufacturers added 73,000 jobs in the first quarter, much more than in the same period last year.
Wages and the Fed
Economists expect that low unemployment will lead to increasingly big pay bumps for workers as employers fight over a dwindling number of candidates. But this recovery has so far bucked that conventional wisdom. The change in hourly earnings varied from month to month last year, but hovered around 2.5 percent, barely keeping up with inflation.
A year-over-year increase of 3 percent in hourly earnings is considered the trip wire that could prompt the Federal Reserve to raise its benchmark interest rate more aggressively than it has signaled.
“Wage growth picking up would suggest the labor market is tightening and that the Fed could have to move more aggressively,” said Matthew Luzzetti, a senior economist at Deutsche Bank. Projections released at a Fed meeting this week suggested that officials were leaning toward a total of three rate increases this year. But strong wage growth could fan fears of an uptick in inflation, pushing them toward a fourth increase, Mr. Luzzetti said. “It means borrowing costs will be moving higher for typical consumers.”
Who’s Been Left Out
The good times have been better for some than for others. Some Americans are still hesitating to enter the job market, perhaps because they remain bruised from the particularly harsh recession a decade ago.
“We have realized that there were even more workers on the sidelines than we previously thought,” said Martha Gimbel, an economist at Indeed.com, a job-search site. She pointed to data showing that more people are working part time, or have been unemployed for a long stretch, than in the last expansion. Ms. Gimbel said that her site had seen an increase in people searching for things like “background check” and “full time,” which could indicate that the economy’s strength is coaxing more people into the working world.
But for some groups, the market has been tougher. The unemployment rate for black workers, for example, has consistently hovered well above the rate for white workers, even as employers complain loudly about a labor shortage in sectors like construction and trucking. The job market has improved for black workers in recent years. But they still faced a jobless rate of 6.6 percent in April, compared with 3.6 percent for whites.
If the numbers were reversed, “the country would be up in arms,” said Andre Perry of the Brookings Institution, whose research focuses on race and structural inequality. Differences in education or degrees don’t explain that gaping disparity, according to federal data.