Published: June 3, 2016 — 5:30 AM PDT
Updated: June 3, 2016 — 6:04 AM PDT
Employers in May added the fewest number of workers in almost six years, reflecting broad cutbacks that may raise concern about U.S. growth and prompt Federal Reserve policy makers to put off an increase in interest rates.
The addition of 38,000 workers, the fewest since September 2010, followed a 123,000 advance in April that was smaller than previously estimated, a Labor Department report showed Friday. The increase in May was less than the most pessimistic forecast in a Bloomberg survey. The jobless rate dropped to 4.7 percent, the lowest since November 2007, as Americans left the labor force.
Smaller employment gains reduce the odds of a more pronounced upturn in household spending and economic growth after a poor start to the year. Fed officials will take into account more judicious hiring, at a time when corporate profits are on a downswing and global markets remain weak, as they consider whether to raise interest rates again.
“The slowdown in job growth looks pretty pervasive across industries,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “It raises some questions about the momentum of growth and about the outlook. The easy thing to say is, this takes June off the table for a Fed hike. To get to July, we’re going to need a pretty nice rebound in the data.”
The median forecast in a Bloomberg survey of economists called for a 160,000 gain in May employment. Estimates of 90 economists ranged from job gains of 90,000 to 215,000 after an initially reported 160,000 increase in April. Revisions to prior reports subtracted a total of 59,000 jobs from payrolls in the previous two months.
The report showed a broad hiring slowdown, including declines in payrolls in construction, manufacturing and mining. Job growth at private service producers slowed, with employment climbing by just 61,000. That brought the diffusion index, which measures the breadth of hiring, to 51.3 in May, the lowest since February 2010.
Furthermore, Americans who are working part-time though would rather have a full-time position, or the measure known as part-time for economic reasons, climbed to 6.4 million in May, the highest since August, from 6 million a month earlier.
The unemployment rate, which is derived from a separate Labor Department survey of households, was projected to drop to 4.9 percent, matching the lowest level since 2008, from 5 percent, according to the survey median.
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