The U.S. created the fewest jobs in more than five years this May as sluggish foreign economies squeezed such sectors as manufacturing and mining, feeding speculation that the Federal Reserve will push back the timing for raising interest rates.
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Market watchers are paying close attention to the jobs report this month to see what effects it will have on the Federal Reserve’s decision on whether to raise interest rates in June. “Before this report, I thought the case for increasing the rates was much stronger”. The civilian labor force participation rate decreased by 0.2 percentage points to 62.6%, pushing the rate down 0.4 percentage points during the past two months, offsetting gains in the first quarter.
The May job gain was lowered by the Verizon workers’ strike, which depressed hiring in the telecom sector by 34,000.
The Labor Department also reported early Friday that the unemployment rate fell to its lowest point since 2007 as more people stopped looking for work. Meanwhile, there was a jump in the number of people working part time who would prefer full-time jobs. Health care, as usual, led jobs added with 46,000 in May; health care employment has increased by 487,000 during the past year. In it, both March and April’s numbers were revised down.
The addition of 38,000 workers last month, the smallest gain since September 2010, followed downward revisions for the previous two months.
Priebus also utilized the jobs report to mention Republican presidential candidate Donald Trump’s credentials. According to BLS Commissioner Erica Groshen, 38,000 jobs were added in May, which apparently did not meet expectations from experts and pundits. Before the jobs report they had seen a July rate hike as likely. There was a 5-cent increase in average hourly earnings last month, bringing the figure to $25.59. Job gains for April and May were revised down by a combined 59,000 jobs. “As this report makes clear, we need that kind of thinking now more than ever in the White House”, Priebus said.
Still, job losses were widespread: Manufacturers cut 10,000 positions, while construction firms cut 15,000. In the past year, average hourly earnings have risen by 2.5 percent.
Fed Chair Yellen said last week that a rate increase would probably be appropriate in the “coming months”, if those conditions were met. The US central bank hiked its benchmark overnight interest rate in December for the first time in almost a decade.
The Fed is also going to be watching for “signs that slack in the labor market is disappearing”, said Gary Burtless, an economist at the Brookings Institution. US Treasury bond yields fell in parallel, the 10-year note dropping sharply from 1.80 percent to 1.72 percent. Temporary-help jobs, a harbinger for future hiring, dropped by 21,000. Retailers, hotels and restaurants added jobs, but at a slower pace than recent months.
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David Berson, chief economist at Nationwide, agreed that the weak May job report significantly reduces the odds of a June rate hike.
