The number of new jobs created in May was significantly below expectations, a clear disappointment to all who were looking for a robust turnaround along the lines of the last few months. Could it be that the extreme market gyrations of past month and anxiety about Europe caused some employers to hold off on their hiring decisions? We may have to wait to find the answer to that question in the coming days.
The Bureau of Labor Statistics reported that non-farm payroll additions for May totaled 431,000, which came in below market expectations of above 500,000. The unemployment rate dropped to 9.7% from 9.9% in the prior month.
While the headline number is one of the highest monthly gains in the past several years, but it was bolstered by a census-related hiring surge. The real number that all of us want to know about in today’s report is private-sector additions. And that number was disappointingly weak in May, coming in at a low 41,000. This is a marked slowdown from the April tally of 231,000 jobs added and a reversal of the accelerating trend in private sector hirings since the start of the year.
While the overall trend in the U.S. labor market has unmistakably been in the right direction, the pace and strength of the improvement has been difficult to handicap. Today’s report follows yesterday’s underwhelming ADP report and the uncertain readings from the weekly claims data in recent days.
The deceleration in private-sector job creations in May could very well be a temporary phenomenon, as monthly reports are prone to significant revisions in subsequent months. But it may be reflective of deeper anxieties among employers about U.S. economic growth in the face of the expected European slowdown and uncertainty about China’s growth profile.
We continue to believe, however, that the U.S. economy remains on a firm and sustainable growth trajectory. The continuing improvement in the U.S. labor market, albeit at a slower-than-expected pace, is a contributing factor to that recovery.Zacks Investment Research
