Jobless Rate Slips to 4.4%
The nation’s unemployment rate slipped to 4.4% in May, its first decline in nine months, the government reported Friday. But economists were taking little solace.
The 0.1 percentage point decline was accompanied by another huge drop in manufacturing jobs. And it failed to square with other figures that suggest the economy still is struggling to catch its balance after stumbling last fall.
About the best that can be said for now, according to analysts, is that the country is demonstrating an uncanny knack for dodging deep trouble.
“We’re still avoiding a recession, and a lot of people wouldn’t have thought that possible a few months ago,” said Tony Crescenzi, a bond market expert with Miller Tabak & Co. in New York.
Although the jobless rate fell, the employment losses that have dogged the economy since fall continued in May. Overall, U.S. employers trimmed payrolls by 19,000 people last month. That came after a reduction of 182,000 jobs in April, the largest monthly cut in a decade.
The ax fell particularly hard at the nation’s factories, where employers slashed an additional 124,000 workers, the largest monthly cut in three years. The losses were only partially offset by extra hiring in services (42,000 positions), construction (31,000), and finance, insurance and real estate (22,000).
The manufacturing slump showed few signs of ending Friday, as major firms, such as chemical maker DuPont Co., announced new job cuts and a widely watched index of factory activity shrank in May for a 10th consecutive month.
The National Assn. of Purchasing Management’s manufacturing index dropped to 42.1 last month from 43.2 in April; any figure below 50 signals contraction. Manufacturing accounts for 20% of the nation’s overall economic activity.
“Manufacturing has yet to see a bottom, and that means more trouble ahead,” said Paul L. Kasriel, chief economist at Northern Trust Co. in Chicago.
There were some bright spots, however.
Although slight, the May jobless decline was the first since September, when the unemployment rate hit a three-decade low of 3.9%. Until last month, the rate had steadily risen.
The decline in the overall rate was accompanied by somewhat larger reductions in the rates for traditionally disadvantaged groups. Unemployment among Latinos fell three-tenths of a percentage point to 6.2%. Joblessness among blacks slipped two-tenths of a point to 8%.
The new figures were brighter than some experts expected. The majority of economists had predicted that the unemployment rate would rise to 4.6%, rather than fall, and that employers would cut 50,000, rather than 19,000, jobs.
Separately, the government reported that U.S. construction spending hit a record in April, powered largely by a home-building boom. Spending rose three-tenths of a percentage point during the month to an annual rate of $855.2 billion. It was the sixth straight month of increase.
Still, the nation’s economy has cooled considerably from the go-go years of late 1990s, and analysts said that Federal Reserve Board efforts to reverse the slowdown have yet to assure a full recovery.
The economy expanded at a meager 1.4% annual rate in the six months from October through March, the slowest pace since the country emerged from recession in 1991. Most analysts predict continued slow growth for much of the rest of the year, with the unemployment rate again rising.
Since the start of the year, Fed policymakers have slashed short-term interest rates five times in half-point increments to a seven-year low of 4%. They are widely expected to cut rates a quarter of a point more when they meet this month.
The central bank has been able to act swiftly, largely because inflation has remained in check. But some analysts said the new employment report suggests that the Fed may not be able to count on that much longer.
The report showed that wages have continued a steady, if slow, climb despite the weakened job market. Average hourly earnings of production and nonsupervisory workers, who make up about 85% of the economy, rose 4 cents, or 0.3%, to $14.26 in May. Over the last year, average hourly wages have climbed 4.3%.
Fed officials have warned repeatedly in recent months that a sharp rise in layoffs and a jump in unemployment could cause consumers to slow their spending and cause the economy to stall.
“If a pattern of job losses emerges, and it is significant enough to undermine consumers’ willingness to spend, this would pose a clear risk to the economy’s prospects,” Anthony Santomero, president of the Philadelphia Federal Reserve Bank, said last week.
A key Fed official suggested Friday that May’s dip in joblessness may be a fluke and that further increases in the unemployment rate are likely. “It would be unusual for unemployment to go up as it has and suddenly stop,” said Robert McTeer, president of the Dallas Federal Reserve Bank. “I think it will go up a little bit more.”
Part of the problem is that the decline is largely the product of a drop in the size of the nation’s labor force rather than an increase in the number of people employed.
