US May jobs report comes in far below expectations
Suddenly, fear of interest rate hikes isn’t so scary any more.
The official US jobs report came out Friday and it showed US companies in May hired at the slowest pace in more than five years, putting a severe damper on the rate-hike aspirations of officials at the US Federal Reserve Bank ahead of this month’s policy meeting.
In May, nonfarm payrolls rose by a seasonally adjusted 38,000, the US Labor Department reported on Friday. It was the weakest performance since September 2010. Meanwhile, the unemployment rate, which is obtained from a separate survey of US households, fell to 4.7% in May from 5.0% in April as fewer people looked for work.
The number of new jobs fell significantly short of the 158,000 increase expected by the consensus estimate of economists. The economists also expected the unemployment rate would hold steady.
Revisions of the April and March numbers also showed employers added a combined 59,000 fewer jobs than previously reported.
Adding May’s weak job growth with the revisions brings the average monthly job gains over the past three months to 116,000, a sharp drop from the average growth of 219,000 jobs over the prior 12 months.
“This was an unqualified dud of a jobs report,” Curt Long, chief economist at the National Association of Federal Credit Unions told the Wall Street Journal. “The unemployment rate fell, but for the wrong reason as labor force participation declined for the second consecutive month.” The share of Americans participating in the labor force fell to 62.6% in May, down 0.2 percentage point from April.
Wage growth proved to be the one positive from the report as the average hourly earnings of private-sector workers rose by 5 cents or 0.2% to $25.59. Over the past 12 months, hourly wages have risen by 2.5%.
May’s weaker-than-expected report puts a speed bump in front of the Fed’s policy makers as they head into their next meeting on June 14-15. The Fed officials have been making noise about wanting to raise interest rates and Wall Street had seen a 21% chance of it happening in June, according to CME Group. But after the May jobs report, investors now say there is a 3.8% chance of that happening.