U.S. job creation weak, even as unemployment rate falls to 4.7%

Credit: DaytonDailyNews

Caption
US adds just 38,000 jobs in May

Credit: DaytonDailyNews

The U.S. economy added just 38,000 non-farm jobs in May, well below most economists forecasts and the fewest in almost six years, the U.S. Department of Labor reported Friday.

While the unemployment rate slid to 4.7 percent — the lowest since late 2007 — that was mainly because more people dropped out of the labor force, which shrunk by more than 450,000 workers last month, reversing strong gains in the first quarter of the year when millions of Americans flooded back into the labor market.

In Ohio, the number of Ohioans working or actively seeking work increased by 28,000 in April — the most recent month for which figures are available — even as employment declined by 13,000 and the unemployment rate nudged up to 5.2 percent.

“We were seeing these really nice increases in the labor force, and, all of a sudden, we’re back to levels we haven’t seen in several months,” said Bill LaFayette, owner of Regionomics, a Columbus-based economics and workforce consulting firm. “This may be suggesting there is more weakness in the economy than people expected…assuming the numbers are accurate.”

The government job figures are regularly revised from month to month as more data comes in, leading economists to caution against reading too much into one month’s report, which can also reflect one-time anomalies.

Employment in May, for example, missed analysts expectations by nearly 130,000 jobs, but more than a quarter of that figure was attributed to a month-long strike by Verizon employees.

Still, revisions in the latest monthly report underscore a worrisome trend: Average job gains for the past three months slowed to 116,000 after employment numbers for March and April were revised down by 59,000 jobs. The economy had been adding more than 220,000 jobs a month over the past year.

“This is the worst jobs report we’ve seen since September 2010, when employment actually contracted,” Lafayette said. “And if you look at growth over the last few months, it’s definitely missing the target. Whether that continues or not remains to be seen.”

The jobs report is likely to be a major factor when Fed policy makers meet later this month to decide whether to increase benchmark interest rates.

“I think the chances of an increase in the Fed Funds rate at this next meeting are slim to none because this (anemic jobs report) surprised everybody,” Lafayette said.

Friday’s jobs report was a surprise in part because most recent economic reports have been encouraging: Consumer spending surged in April. Americans ramped up purchases of autos and other big-ticket items, like appliances.

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.

Retail hiring has lagged for the past two months, likely in part a reflection of the shift to online shopping from physical stores. Construction hiring was strong earlier this year, thanks to milder winter weather. That might have pulled forward by a couple of months hiring that normally would have taken place in April and May.