By Jeannine Aversa
Associated Press
The latest snapshot, released by the Labor Department on Friday, offered a mixed picture of the jobs climate. Wage growth, meanwhile, slowed, a development that should ease concerns about inflation getting out of hand.
Job cuts at factories, retailing and other fields tempered job gains in education and health care, financial activities and elsewhere.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% in April to 4.6% in May, the lowest since July 2001.
The payrolls figure and the unemployment rate come from two different economic surveys, which can sometimes provide - as in Friday's case - a conflicting picture of what is happening in the labor market.
The seasonally adjusted overall civilian unemployment rate - 4.6% in May - is based on a survey of 60,000 households. It showed that 288,000 people said they found employment last month, outpacing the number of people who couldn't find work.
Economists tend to put more stock, however, in the much broader business survey of 400,000 work sites that is used to calculate the payroll figures.
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%.
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.
The report comes as President Bush is coping with low job-approval ratings. Trying to breath life into his economic agenda, Bush earlier this week tapped Wall Street veteran Henry Paulson, chief of Goldman Sachs, to be the next Treasury secretary.
Workers' average hourly earnings stood at $16.62 in May, a 0.1% increase from April. That was smaller than the 0.3% rise economists were expecting and marked a moderation from a sharp pickup in earnings registered in April.
Wage improvement is good for workers but a rapid, sustained acceleration can ignite inflation concerns.
To thwart inflation the Federal Reserve in May bumped up a key interest rate for the 16th time since June 2004, when the central bank embarked on its credit-tightening campaign. Some economists predict another increase will come at the Fed's next meeting, June 28-29. Others, however, think the Fed might leave rates alone at that time to assess economic activity.
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.
Second-quarter growth should be around a 3% to 3.5% pace; that would still be decent but would mark a deceleration from the brisk 5.3% pace logged in the first quarter of this year.
Oil prices, which hit a record high of more than $75 a barrel in late April, are now hovering above $71 a barrel. Gasoline prices have topped $3 a gallon in some areas.
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.