May’s job gains disappointed at 38,000. Even excluding strike effects, job gains have clearly slowed and signal weaker growth in 2016 compared to 2015. A Fed move for June is off the table.
Overall job growth in May was a disappointing 38,000. Growth was in part depressed by the Verizon strike, which kept about 35,000 workers off the payrolls in the telecommunications sector. However, weakness was widespread outside the information sector. Employment fell in all goods producing sectors, including construction (for second month in a row) and manufacturing, consistent with below break-even ISM manufacturing employment index. Private services grew by 61,000, the smallest gain in nearly four years. Temporary employment, traditionally seen as a leading indicator of total employment, fell by 21,000 in May. May’s decline follows a string of weaker readings in recent months. Over the past year, temporary jobs have increased an average of only 1,400 per month, the weakest print since payroll employment bottomed in February 2010. With the slowdown due to more than a clear one-off, today’s report lowers the odds of the FOMC raising rates in June.
The labor force participation rate fell back to 62.8 percent. The rebound in participation from September through March increasingly looks like a head fake and renews doubts about how many workers sidelined since the recession can be drawn back into the labor force. The unemployment rate fell to 4.7 percent, but misrepresents the situation given the sharp decline in the civilian labor force over the past two months. We suspect the FOMC may once again lower its estimates of what would be considered full employment with its updated economic projections later this month.
Reference : Wells Fargo
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