Saturday, June 4, 2016

May 2016 jobs plunge unexpectedly, manufacturing and construction jobs drop sharply. Only 38,000 jobs added, 164,000 had been predicted. March and April revised down. Jobs reflect poor GDP-Reuters


Nonfarm payrolls increased by only 38,000 jobs last month, the smallest gain since September 2010, the Labor Department said on Friday. Employment gains were also restrained by a month-long strike by Verizon workers, which depressed information sector payrolls by 34,000 jobs.

Underscoring the report's weakness, employers hired 59,000 fewer workers in March and April than previously reported. While the unemployment rate fell three-tenths of a percentage point to 4.7 percent in May, the lowest level since November 2007, that was because 458,000 Americans gave up the search for work.

"This is not a good report, and it may well give Fed officials second thoughts about increasing interest rates again this month or next, as some have suggested lately," said Peter Ireland, an economics professor at Boston College....

Fed Chair Yellen said last week that a rate increase would probably be appropriate in the "coming months," if those conditions were met. The U.S. central bank hiked its benchmark overnight interest rate in December for the first time in nearly a decade....

Economists had forecast payrolls rising by 164,000 in May and the unemployment rate falling to 4.9 percent.

The weak report bucks data on consumer spending, industrial production and housing that have indicated the economy was gaining momentum after growth slowed to a 0.8 percent annualized rate in the first quarter.

In separate reports on Friday, the Commerce Department said goods exports rebounded strongly in April and orders for manufactured goods recorded their biggest gain in six months.

A survey by the Institute for Supply Management, however, showed a significant cooling in services sector activity in May.


Some economists said the sharp slowdown in employment last month was payback after unseasonably warm weather boosted hiring in February and March. They also viewed the weak payroll growth as a delayed response to tepid economic growth in the previous two quarters.

"The simplest explanation is that job growth tends to respond with a lag to GDP growth, and GDP growth was rather weak around the turn of the year. This would suggest job growth should recover along with overall growth in economic activity," said Michael Feroli, an economist at JPMorgan in New York...

Last month, the goods producing sector, which includes mining, manufacturing and construction, shed 36,000 jobs, the most since February 2010. Even excluding the Verizon strike, payrolls would have only increased by just over 70,000....

Other details of the employment report were not encouraging. Average hourly earnings rose five cents, or 0.2 percent. That was a slide from April's 0.4 percent increase and left the year-on-year rise at 2.5 percent.

A broad measure of unemployment that includes people who want to work but have given up searching and those working part-time because they cannot find full-time employment held steady at 9.7 percent."


No comments: