US employers drastically slowed their hiring in May, adding just 38,000 jobs, the fewest in more than five years and a sign of concern after the economy barely grew in the first three months of the year.
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The Labor Department said that employers added just 38,000 jobs last month, the fewest since September 2010.
The Fed raised its key benchmark interest rate in December for the first time in almost a decade, but has held off since then due to concerns earlier this year about a global economic slowdown and financial market volatility. Traders expect the Fed to go ahead with a mid-summer rate hike as long as the US economy bounces back from slow growth in the first quarter and continues to add jobs. The majority of economists in the survey said their conviction that the Fed might raise rates in two weeks had decreased in the last month. The U.S. central bank hiked its benchmark overnight interest rate in December for the first time in almost a decade.
United States consumer spending jumped by one per cent in April, the biggest increase in six years, the Commerce Department said earlier this week.
The day before the report, CNN, The Wall Street Journal, Business Insider, and Market Watch preemptively tried to prepare their readers for a “softer” number of jobs by playing up a Verizon strike of around 35,000 employees which they warned would reduce the jobs number.
But analysts said that, added to the concerns about the June 23 referendum over Britain quitting the European Union, which could deeply rile markets, the jobs report virtually eliminated any chance of a rate hike by the Fed at its June 14-15 meeting. The report was mixed as the unemployment rate dropping to 4.7 percent and wages grew by 0.2 percent.
The official, Lael Brainard, a Fed board member, said that other economic developments have also muddied the picture of the US economy.
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.
Most said Friday’s far weaker-than-expected US job market data weighed heaviest in the downgrade of their rate outlook.
For the 12 months ending May 31, average hourly earnings increased 2.5 percent. “This would suggest job growth should recover along with overall growth in economic activity, but even if that does occur we think the days of steady 200,000-plus payroll figures are probably behind us”, they wrote in a note.
“The good news is that it should not last”, Shepherdson said of the poor job growth. Wages have not come back in recent months as strongly on other employment indicators. The drop, however, was caused not by job creation but by people leaving the workforce.
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While unemployment slid from 5 percent to 4.7 percent, the lowest level since November 2007, the rate fell for a troubling reason: almost a half-million jobless Americans stopped looking for work and so were no longer counted as unemployed. Employment in mining shrank by 10,000 on the prolonged decline in resource prices. In March, officials indicated that they expected two additional increases this year. And a measure of employment fell for the second time this year. Government payrolls increased by 13,000 and healthcare jobs jumped by 55,400.
