Surprising data release
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The Employment report was a shocker this morning, so let’s take a look at some of the key items. US May Nonfarm payrolls: 38,000 Expectations: 158,000 What drove the data: The 38,000 jobs added is the slowest since Sept. 2010. Job losses were again seen in the mining sector (where oil is included) as another 10,000 decline. that brings losses for the sector since Sept. 2014 to 207,000. Information jobs fell 34,000, though that was largely skewed by the strike at Verizon during the data survey week as 35,000 workers were on strike. The tepid increase in jobs growth takes the three month average down to 116,000, well below the level around 200,000 that has been seen over recent reports. Revisions to March and April were significant, with March now at 186,000 (208,000 prior) and April at 123,000 (160,000 prior), for a total of 59,000 fewer jobs than previously reported. May Unemployment: 4.7% Expectation: 4.9% In May, 7.4 million workers who wanted a job couldn’t find one. And a broad measure of unemployment that includes Americans stuck in part-time jobs or too discouraged to look for work held steady at 9.7%, unchanged from April. The unemployment rate decline of 0.3 percentage point, to 4.7%, reflected declines in the number of unemployed of 484,000, to a level of 7.4 million. This is the lowest unemployment rate since late 2007, largely reflected more people dropping out of the workforce. The unemployment figure averaged 4.6% in the years before the recession then peaked at 10% in 2009. The participation rate also declined after having nudged higher in the first quarter. Now at 62.6%, its down 0.4 percentage points over the past two months, offsetting the gains seen in the first quarter of 2016. Wages edged higher, up 5 cents or 0.2%, at $25.59 per hour, while the average work week held steady at 34.4 hours per week.
Comments: This is a very downbeat report, well under expectations even as the Verizon strike was a “known” factor reducing the result. But even if all those jobs get added back into the mix for the revisions, that still leaves would bring May up to 73,000 jobs created. The participation rate falling also takes out most of the rise seen earlier this year. While this doesn’t signal that the US jobs market is suddenly falling apart, it is underscoring what is a tight jobs market and one that still has seen little wage growth. And more folks are dropping out of the labor market. This is a report that will lessen expectations for a rate rise in June and likely also for July. The Fed has touted the solid jobs market for months and the last two months have certainly not lived up to that billing. This presents a difficult situation for the Fed. But with two subdued jobs report and the “Brexit” vote coming June 23, a hold on Fed policy should be the result at the June FOMC session. Markets have also reacted to the data, with global stock indices falling and the yield on the 10-year US Treasury report dropping after the report release.
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NOTE: This column is copyrighted material; therefore reproduction or retransmission is prohibited under U.S. copyright laws. | ||
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