U.S. NFP increases by only 38,000 in May, dims Fed rate hike bets
The U.S. economy created the fewest number of jobs in more than 5-1/2-years in May as manufacturing and construction employment fell sharply, suggesting slippage in the labor market that could make it harder 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. Employment gains were also restrained by a month-long strike by Verizon (VZ.N) workers, which depressed information sector payrolls by 34,000 jobs.
Underscoring the report’s weakness, employers hired 59,000 fewer workers in March and April than previously reported. While the unemployment rate fell three-tenths of a percentage point to 4.7 percent in May, the lowest level since November 2007, that was in part due to people dropping out of the labor force.
“This is not a good report, and it may well give Fed officials second thoughts about increasing interest rates again this month or next, as some have suggested lately,” said Peter Ireland, an economics professor at Boston College.
The Fed 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.