U.S. gains just 38K jobs as employers slow hirings
WASHINGTON – U.S. employers drastically slowed their hiring in May, adding just 38,000, the fewest in more than 5 years and a sign of concern after the economy barely grew in the first three months of the year.
At the same time, the unemployment rate tumbled to 4.7 percent from 5 percent, the Labor Department said Friday, its lowest point since November 2007. The rate fell for a problematic reason: Nearly a half-million jobless Americans stopped looking for work and so were no longer officially counted as unemployed.
The much-weaker-than-expected jobs report will raise doubts the Federal Reserve will increase the short-term interest rate it controls at its next meeting in mid-June or perhaps even at its subsequent meeting in late July. Many analysts expected an increase by July.
It is also likely to roil the presidential race, as the expected GOP nominee Donald Trump called it a “terrible jobs report” and a “bombshell” on Twitter. The figure comes just days after President Obama touted his economic record in Elkhart, Ind.
The government estimated the economy grew at just a 0.8 percent annual rate in the January-March quarter.
Hiring in March and April was also revised lower, with job gains now just 123,000 in April, down from an initial estimate of 160,000. March was downgraded to 186,000 from 208,000.
Job gains now averaged just 116,000 in the past three months, down sharply from an average of 230,000 in the 12 months ending in April.
The total was lowered by the Verizon workers’ strike, which depressed hiring in the telecom sector by 34,000.
Still, job losses were widespread: Manufacturers cut 10,000 positions, while construction firms cut 15,000. Temporary help firms shed 21,000 jobs. Retailers, hotels and restaurants added jobs, but at a slower pace than recent months.
Friday’s dismal jobs report was a surprise in part because most recent economic reports was encouraging: Consumer spending surged in April. Americans ramped up purchases of autos and other big-ticket items, like appliances.
Home sales and construction also increased. Sales of new homes reached an eight-year high in April.
Even manufacturing, which suffered from weak growth overseas and a strong dollar that depressed exports, is showing signs of stabilizing. Factory activity expanded in May for a third straight month, according to a survey of purchasing managers.
In December, after months of economic improvement, the Fed raised its benchmark short-term rate after pegging it near zero for seven years. In March, officials indicated they expected just two additional increases this year.
Chair Janet Yellen has long made it clear she studies a “dashboard” of job market data to help assess the economy’s health, rather than a single number such as hiring or unemployment.
Fed officials may not keep investors guessing for long: Yellen will speak Monday in a closely watched address that may show how she interpreted Friday’s report.
And Lael Brainard, a Fed official who is a longtime skeptic of raising rates, was to speak later Friday. Any sign Brainard is willing to accept higher rates would likely be seen as evidence Yellen – and the Fed – may act soon.