U.S. Jobless Rate Declines but New-Job Growth Falters
The nation’s unemployment rate slipped back to a near-three-decade low of 4.2% in May as the economy continued to roar forward, government reports showed Friday.
However, somewhat confusingly, the nation’s jobs engine seemed to sputter, creating only 11,000 new positions during a month when more than 200,000 had been expected.
Most analysts dismissed the weak jobs figure as a fluke and said that a string of recent reports point to continued strong growth for an economy already in its eighth year of expansion.
“The jobs number belies the economy’s strength,” said Mark M. Zandi, chief economist of RFA Dismal Sciences, of West Chester, Pa. “There are scant signs that this economy is slowing.”
Although strong growth is good news for the average person, it could prove troubling when the Federal Reserve meets later this month to decide on interest rates. The central bank has already said it is inclined to raise rates to forestall a revival of inflation if the economy does not slow down soon.
Investors were divided over the new employment reports. Stock buyers apparently interpreted the weak jobs number as reducing chances of a Fed rate hike and sent the Dow Jones industrial average up 136.15 points, or 1.1%, to close at 10,799.84.
By contrast, bond buyers, who fear that growth-driven inflation will erode the value of their holdings, sent the price of the bellwether 30-year U.S. Treasury bond down and the yield or market interest rate, which moves in the opposite direction, up two basis points to 5.96%, its highest level in more than a year.
May’s 4.2% unemployment rate matched the March level and was down a tenth of a point from April, officials with the Bureau of Labor Statistics said. Before that, the bureau said, the jobless rate hadn’t been so low since February 1970.
Low unemployment continued to be a boon for traditionally disadvantaged groups such as blacks, Latinos, teenagers and women.
Although still substantially higher than the rate for whites, black unemployment fell two-tenths of a point to a record low 7.5%. The Latino rate, although down a similar two-tenths of a point to 6.7%, was not a record. Rates for teenagers (12.6%) and women (3.6%) were at their lowest levels in 30 years.
Much of the anemic growth in jobs was traceable to the loss of manufacturing and construction positions, which was barely made up for by increases in services, transportation and utilities.
Manufacturers shed 45,000 jobs in May, raising to 453,000 the number of positions they have cut since hitting a recent hiring peak in March of last year. Construction companies cut their job rolls by 40,000 after increasing them substantially over the last eight months. The services sector added only 71,000 workers during the month, well below its average monthly addition of 125,000 over the last year.
Normally, such weak jobs growth would be interpreted as evidence of a slowing economy. But analysts said the numbers do not square with other measures that show continued economic strength.
May’s small job-growth number was partially offset by an upward revision in April’s number, a change that kept the average monthly increase at a robust 210,000 jobs.
BLS Commissioner Katharine Abraham traced the “erratic” performance of the jobs numbers to the unseasonably warm winter, which resulted in hiring that normally occurs in the spring and early summer being done in January and February this year.
In the last week, separate reports have shown a pickup in manufacturing, a big jump in new-home sales and record or near-record auto sales.
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STOCKS SOAR
The positive jobs report helped bolster investor confidence. C2
