Only 38,000 jobs were created in May, a drop of 4.7 percent since April, and 120,000 below the media estimate of the Labor Department estimate. It is the lowest number in the U.S. since 2010 and reflects broad cutbacks in employment that raise concern about U.S. growth and prompt Federal Reserve policy makers to put off an increase in interest rates.
Revisions to previous payroll data showed employers added a combined 59,000 fewer jobs in April and March than previously reported. That brought average monthly job growth in the past three months to 116,000, a sharp slowdown from the average growth of 219,000 over the prior 12 months.
The weaker-than-expected report almost certainly nixes a rate increase by the Fed at its June 14-15 meeting and pushes a hike further away from its July meeting. After the report’s release, Fed governor Lael Brainard said in a speech in Washington that “tentative signs of slowing in the labor market” and ongoing risks such as sluggish global growth mean “we cannot take the resilience of our recovery for granted.”
Less Household Spending
The lower employment numbers indicate a downturn in in household spending and economic growth and Fed officials will weigh these factors together with weaker global markets and poorer corporate profits before reaching a rate increase decision.
According to Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, “The slowdown in job growth looks pretty pervasive across industries. It raises some questions about the momentum of growth and about the outlook. …….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.”