Jobs Report Disappoints
Employers added just 38,000 jobs in May, well below consensus expectations, the Bureau of Labor Statistics reported on Friday.
Despite sparse job creation, BLS reported the unemployment rate fell to 4.7 percent, its lowest rate in more than eight years. The number of unemployed persons fell by 484,000 to 7.4 million.
BLS revised the change in total nonfarm payroll employment for March from +208,000 to +186,000, and revised April from +160,000 to +123,000. With these revisions, employment gains in March and April combined were 59,000 less than previously reported. Over the past three months, job gains have averaged 116,000 per month.
“Even excluding [Verizon] strike effects, job gains have clearly slowed and signal weaker growth in 2016 compared to 2015,” said John Silvia, chief economist with Wells Fargo Securities, Charlotte, N.C. “A Fed move for June is off the table.”
Silvia said growth was in part depressed by the Verizon strike, which kept nearly 35,000 workers off the payrolls in the telecommunications sector, but noted “widespread weakness” in many sectors. “Over the past year, temporary jobs have increased an average of only 1,400 per month, the weakest point since payroll employment bottomed in February 2010,” he said. “With the slowdown due to more than a clear one-off, today’s report lowers the odds of the FOMC raising rates in June.”
BLS reported the civilian labor force participation rate in May decreased by 0.2 percentage point to 62.6 percent. The rate has declined by 0.4 percentage point over the past two months, offsetting gains in the first quarter. The employment-population ratio, at 59.7 percent, was unchanged in May.
“The rebound in participation from September through March increasingly looks like a head fake and renews doubts about how many workers sidelined since the recession can be drawn back into the labor force,” Silvia said. “The unemployment rate fell to 4.7 percent, but misrepresents the situation given the sharp decline in the civilian labor force over the past two months.
BLS said the number of long-term unemployed (those jobless for 27 weeks or more) declined by 178,000 to 1.9 million in May. These individuals accounted for 25.1 percent of the unemployed. The number of persons unemployed less than five weeks decreased by 338,000 to 2.2 million.
The report said the average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in May. The manufacturing workweek increased by 0.1 hour to 40.8 hours, and manufacturing overtime was unchanged at 3.2 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.6 hours.
BLS also reported average hourly earnings for all employees on private nonfarm payrolls increased by 5 cents to $25.59, following an increase of 9 cents in April. Over the year, average hourly earnings have risen by 2.5 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 3 cents to $21.49 in May.
