WASHINGTON (MaceNews) – The unexciting May jobs report, though no disaster, reinforced the perception of trend deterioration Friday, with the deceleration in earnings the leading negative, followed by the lifeless manufacturing and construction numbers.
Total payrolls growth was well below expectations with its 75,000 increase, while revisions to March and April subtracted 75,000 jobs from the year’s total, the Bureau of Labor Statistics reported. The unemployment rate stayed at its nearly half-century low 3.6%. Labor participation didn’t change, a positive in the context of the presumed exodus of retirees from the workforce.
The over-the-year increase in average hourly earnings was 3.1%, a tenth lower than in April and March and three-tenths lower than in February, a path downward that is confounding the analysts who earlier in the year nearly universally saw a tight labor market boosting wages.
The numbers only slightly cut the sentiment in favor of the fed funds rate staying the same in the June 18-19 meeting, to 70.8%, according to the CME’s Fed tracker. However, the stay-the-same number slipped to 21% for the July FOMC, with everyone else expecting either one or two 25 basis point cuts. For September’s meeting, only little more than 4% registered stay-the-same sentiment.
By the July meeting the markets may have learned whether the U.S. will have applied new Mexico and China tariffs. Yet even in a worst-case scenario, July may be too soon to see actual tariff damage seeping into the economy. The Fed could choose to wait for data points to clearly deteriorate before taking action instead of moving preemptively, a process that could take months.
The meager 4,000 gain in construction employment in a spring month was striking. According to the report’s measure of weather effects, the widespread Midwest flooding was not a factor.
Manufacturing was up even less, 3,000, jibing with the softening in the May PMI momentum indicator which nevertheless still signaled expansion.
Goods-producing jobs rose only 8,000 while services jobs were up 82,000, the BLS reported.
Retail trade was more sharply negative, losing 7,600 payroll slots. Transportation and warehousing was about flat.
The professional and business services category at the core of business development was healthy, with 33,000 more jobs, yet it was only about half the preceding month’s total.
Health care , at 24,000, was also about half of the April increase.
With revisions, the average monthly payrolls gain for the past three months is 151,000 and for the year to date, 164,000, compared to all of last year’s 223,000.
In the markets, hints the talks were going well with Mexico and that Monday’s deadline could be at least postponed buoyed stocks, overwhelming any disappointment with the jobs report. Analysts will be watching to see if the optimism on the talks is altered with the president’s return from overseas. The Treasury 10-year note showed the yield moving down to 2.070% by mid morning.