Only 38,000 new USA positions were added in May, the worst monthly result in six years.
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The problem is, May’s report came on the heels of a disappointing April jobs report, in which only 160,000 jobs were created – fewer than the 200,000 than had been expected. The one-tenth point rise in the U-3 rate in March, for example, was a function of more potential workers getting out and looking for jobs. We used to have the same female labor force participation rates as Canada, back in 2000, and now we’ve fallen way behind because they have sensible paid leave policies and we don’t. Average weekly wages rose to $880.30.
“Terrible, but temporary”, Pantheon Macro’s Ian Sheperdson said. “The numbers are soft across the board, with the exception of education, health and government”. Now, many traders believe that has been pushed back.
Shepherdson said the surprisingly low job-creation number – analysts had predicted 155,000 new jobs in May – reflected a confluence of events, including a long strike by workers at communications giant Verizon and a delayed turn to caution by business owners after the stock market slump in the first quarter. That total would have been roughly equivalent to the 200,000-plus additions that have been a staple of the payroll recovery in recent years. That is much better than 2015 – it’s not where we want it to be, but we’re starting to see these upward pressures on wages.
“The weakening appears to be exaggerated at least”, High Frequency Economics’ Jim O’Sullivan said.
The drop in unemployment may seem like good news but the reason behind it was almost half a million unemployed Americans giving up the search for work and, therefore, no longer being officially counted as unemployed.
Yellen is scheduled to speak Monday in Philadelphia and is expected to update her analysis just a week before the Federal Open Markets Committee is set to convene for its policy meeting and a possible decision regarding interest rates.
Underscoring the report’s weakness, employers hired 59,000 fewer workers in March and April than previously reported.
“In light of the weaker-than-expected employment report, we have revised our subjective odds of the timing of the next FOMC rate increase”, Goldman Sachs economists said. “This now assures that June is off the table but may not rule out July”.
BNP Paribas: “Ouch!. We expect the Fed to view this report as negative”. There was a 5-cent increase in average hourly earnings last month, bringing the figure to $25.59. Hiring in May was the slowest since 2010, when the nation’s payrolls were still shrinking. The 38,000 jobs figure may be low, but it is just one month.
Canada is to publish the monthly employment report. “While a hike in July is still a possibility, we are increasingly comfortable with our September call”.
Economic growth was feeble in the fourth quarter of 2015 and early this year, raising speculation that a resilient job market eventually might feel the effects. “Make that 14 million minus 21K”.
The Fed is likely hesitant to raise interest rates in the fall, right before the presidential election in November.
Every month on jobs day, the Labor Department’s Bureau of Labor Statistics puts out a ton of employment-related data, each of which tells its own story about the state of the economy. “With a quirky strike and ordinary volatility, today’s data fit that description”. The Fed has been looking to impose its second interest rate hike since it slashed rates to zero at the height of the Great Recession, but the weak May jobs report could delay action.
But Yellen did not specify a date for a Fed move.
UBS: “What about the Fed?”
This is only the latest obstacle to the Fed’s two-year struggle to normalise US monetary policy after dropping rates dramatically during a protracted downturn.
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Sam Ro is managing editor at Yahoo Finance.
