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Unemployment Rate Jumps to 6%

Nonfarm payrolls rose 43,000 in April, near the consensus estimate of 53,000. However, March payrolls was revised to show a drop of 21,000 rather than the gain of 58,000 originally reported. The revision was concentrated in the service sector, especially business services.

The jump in the unemployment rate to 6.0% from 5.7% in April was much more than the 5.8% rate expected by the market. The bulk of the payroll weakness was found in the decline of 79,000 in construction, reflecting a return to normal weather after the warm and dry winter, which had boosted construction employment.

Manufacturing jobs fell another 19,000, in line with expectations, but was offset by a 79,000 services gain. The service increase included a 52,000 rise in personnel-supply services, following the (revised) 69,000 gain last month.

Hourly earnings were up 0.1%, below the consensus estimate of 0.3%. Average weekly hours fell to 34.1 from 34.2, a bad sign for future hiring. Aggregate hours fell 0.3% in April, suggesting a weak production month.

The downward revision of March payrolls and the jump in the unemployment rate suggest the second quarter could be weaker than S&P expects, and are further reasons for the Fed to keep monetary policy on hold.

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