The U.S. economy created the fewest number of jobs in more than five years in May, hurt by a strike by Verizon workers and a fall in goods producing employment, pointing to labor market weakness that could make it difficult for the Federal Reserve to raise interest rates.
Nonfarm payrolls increased by only 38,000 jobs last month, the smallest gain since September 2010, the Labor Department said on Friday. Employers hired 59,000 fewer workers in March and April. The government said the month-long Verizon strike had depressed employment growth by 34,000 jobs.
The goods producing sector, which includes mining and manufacturing, shed 36,000 jobs, the most since February 2010.
Even without the Verizon strike, payrolls would have increased by a mere 72,000.
The Verizon workers, who were considered unemployed because they did not receive a salary during the payrolls survey week, returned to their jobs on Wednesday. They are expected to boost June employment.
The jobless rate fell three-tenths of a percentage point to 4.7 percent in May, the lowest since November 2007. The decrease in the unemployment rate was in part due to a people dropping out of the labor force.
Economists polled by Reuters had forecast payrolls rising 164,000 in May and the unemployment rate falling to 4.9 percent.
Fed Chair Janet Yellen has said monthly gains of roughly 100,000 jobs are needed to keep up with growth in the work-age population. The U.S. central bank has signaled its intention to raise rates soon if job gains continued and economic data remained consistent with a pickup in growth in the second quarter.
Yellen said last week that a rate increase would probably be appropriate in the “coming months,” if those conditions were met. Data on consumer spending, industrial production, goods exports and housing have suggested the economy is gathering speed after growth slowed to a 0.8 percent annualized rate in the first quarter.