New Job Numbers Disappointing genre: Polispeak & Six Degrees of Speculation

The latest jobs report indicates the addition of far fewer jobs than economists had expected. The increase of 70,000 jobs was far below the anticipated increase of 170,000 as reported by the Associated Press here.

The count of new jobs generated last month, 75,000, was the smallest since October, when hiring practically stalled as companies were jolted by fallout from the Gulf Coast hurricanes. Job gains for March and April turned out to be weaker than previously reported.

On the other hand, the unemployment rate dropped a notch from 4.7 percent in April to 4.6 percent in May, the lowest since July 2001.

The payrolls performance was much weaker than the 170,000 jobs that economists were forecasting would be added in May. They also were predicting the unemployment rate to hold steady at 4.7 percent.

Adding to the weakness in the payroll picture: job gains for both March and April were lowered. Employers actually added 126,000 new jobs in April, instead of the 138,000 previously reported. For March, employment grew by 175,000, rather than 200,000.

When these figures are combined with other recent economic information, it appears to indicate that we are entering a period of declining growth. Concerns about inflation, interest rates, and housing starts have been previously reported by Thought Theater here.

Economic growth in the April-to-June quarter is expected to moderate as rising borrowing costs, lofty energy prices and a slowdown in the housing market take their toll on consumers and, to a lesser extent, businesses.

Other economic barometers offered a mixed picture for May. Manufacturing activity lost a bit of momentum. Consumer confidence sagged. But many retailers reported better than expected sales, suggesting that most shoppers are still spending with some gusto despite high energy prices.

The report also showed the average time that the 7 million unemployed spent searching for work in May was 17.1 weeks. That was up from 16.8 weeks in April and was the highest since February.

Daniel DiRito | June 2, 2006 | 7:51 AM
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