The U.S. economy continued to display momentum in the second quarter of this year and created a vigorous 223,000 new jobs in May after only 159,000 new jobs in the previous month.

In May the unemployment rate fell to an eighteen year low of 3.8%, suggesting that the nine-year-old economic expansion still has plenty of steam despite being one of the oldest ever.

In addition, the closely watched average hourly earnings indicator rose 0.3% in May, which translated into a 2.7% wage increase over the past twelve months. The twelve-month increase in April was marginally lower at 2.6%.

Despite the tight labor market, the substantial number of unfilled jobs, and growing complaints by American firms that they can’t find new employees with the right skills, the labor shortage is still not triggering large increases in take-home pay. Wages are still only increasing very gradually.

The key takeaway from the monthly employment surveys is that the American economy is showing no meaningful sign of slowdown, wage gains continue to be modest, and price inflation is still increasing slowly despite the pressure of sustained output growth.

Consequently, the Federal Reserve is on track to continue its program of tightening over the coming quarters. All of this almost ensures one to two more increases in Federal Reserve interest rates this year.