Economy Watch: Job Growth Tepid in May

Cornelia Mascio
Giugno 5, 2017

Some 138,000 jobs were added to the USA economy in May, according to the monthly jobs report released by the Bureau of Labor Statistics Friday morning. Job gains occurred in health care and mining.

The civilian labor force participation rate was 62.7%, a 0.2% decrease from April. As of Friday morning, traders saw a 93.5 percent chance of a rate hike.

"Among the unemployed, the number of job losers and persons who completed temporary jobs declined by 211,000 to 3.3 million in May", according to the BLS report.

Nonfarm payroll employment increased by 138,000 in May, compared with an average monthly gain of 181,000 over the prior 12 months. The food services sector added 30,000 jobs, bringing its year over year increase to 267,000. Over the past 3 months, job gains have averaged 121,000 per month. The Labor Department added 230,000 jobs to its count for something called the Birth/Death Model, which tries to guess the number of jobs being created by newly "born" USA companies that might be missed in the official survey. Factories reduced their payrolls by 1,000 in May after adding 11,000 net new jobs the previous month. The smaller and more volatile survey of households also showed a drop in employment.

Other industries remained essentially flat, including construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, government, and financial activities. However, segments of the economy that affect commercial space absorption still had reasonably good job creation.

Some economists said things are finally slowing down after three straight years of growth.

Looking behind the immediate numbers, the picture is mixed at best.

The Bureau of Labor Statistics announced on Friday that the unemployment rate had fallen to 4.3%, the lowest level since 2001, all but guaranteeing that the Federal Reserve will raise interest rates at its next meeting this month.

Average hourly earnings rose 0.2 per cent for the month, and are up 2.5 per cent for the year, but this more or less keeps pace with inflation, with the Consumer Price Index for urban consumers up 2.2 per cent over the 12-month period.

"The weak job growth number isn't a disaster because it still keeps up with population growth", said Paul Diggle, senior economist at Aberdeen Asset Management.

Restaurants and healthcare firms posted solid job gains.

There are plenty of explanations for the weaker-than-expected May jobs report, but the big picture is clear: The US labour market has lost some of its mojo.

What's driving this disappointing data? Given this, the reading for last month could be a "short-lived seasonal hiccup", Stephen Stanley, chief economist at Amherst Pierpont Securities LLC in NY, said in a note. Moreover, some slowdown in hiring was probably inevitable as the unemployment rate falls and the pool of available workers begins to dry up.

David Berson, chief economist for Nationwide, was much more negative.

Manufacturers trimmed about 1,000 positions, the Labor Department said. Labor force participation declined two-tenths of a percent to 62.7 percent, near the lowest levels since the 1970s. "The headline payroll number looks to me to have been distorted by the early survey", he said.

But the fractious political landscape may derail the Fed's plan.

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