U.S. Hiring Disappoints, Jobless Rate Falls to 9.7%
American companies hired fewer workers in May than forecast and workers dropped out of the labor force, indicating government support is still needed to spur economic growth.
Private payrolls rose by 41,000, Labor Department figures showed today, trailing the 180,000 gain forecast by economists. Including government workers, employment rose by 431,000, boosted by a jump in hiring of temporary census workers. The jobless rate fell to 9.7 percent from 9.9 percent.
Stocks slumped and Treasuries surged as the report raised concern the world’s biggest economy was susceptible to shocks such as the European debt crisis. The figures may deal a blow to the Obama administration as the Congressional elections approach, and bolster forecasts the Federal Reserve will maintain its pledge to keep interest rates low for “an extended period.”
“The labor market is extremely weak and has been in a mild recovery,” said Steven Wieting, managing director of economic and market analysis at Citigroup Global Markets Inc. in New York. “Policy makers need to be careful. No one should be taking stability for granted.”
The Standard & Poor’s 500 Index dropped 3.4 percent to close in New York at 1,064.88, the lowest level since Feb. 8. The 10-year Treasury note rose, pushing the yield down to 3.20 percent from 3.37 percent late yesterday.
Estimates of 82 economists surveyed by Bloomberg News for total payrolls ranged from 220,000 to 750,000. Last month’s gain followed a 290,000 increase in April employment.
Economists surveyed also forecast the jobless rate would fall 9.8 percent. Unemployment reached a 26-year high of 10.1 percent in October. The decrease in joblessness last month reflected a 322,000 drop in the labor force as Americans grew discouraged over hiring prospects.
Temporary census jobs accounted for 411,000 of the May increase in payrolls, leaving the ex-census figure at 20,000. The hiring of temporary workers to conduct the decennial population count probably peaked last month, economists said.
The unwinding of census employment may keep distorting the payroll figures for months as the government dismisses workers when the count is completed. For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010.
“Job growth is going to be anemic,” said Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California. “It requires 150,000 to 200,000 jobs in order to reduce that unemployment rate, which is a key focus for the administration,” he said in an interview with Bloomberg Radio’s Tom Keene on “Bloomberg on the Economy.”
Obama on Jobs
President Barack Obama said the employment report showed the economy was moving in the right direction.
“While we recognize that our recovery is still in its early stages, and that there are going to be ups and downs in the months ahead -- things never go completely in a smooth line -- this report is a sign that our economy is getting stronger by the day,” the president said while visiting a truck factory in Hyattsville, Maryland.
Manufacturing remained a bright spot as factories increased payrolls by 29,000 in May, a fifth straight gain. The average number of hours worked, overtime, and earnings also climbed.
Fed Chairman Ben S. Bernanke yesterday said joblessness is among the “important concerns” for the recovery.
“One particularly difficult issue is the continued high rate of unemployment,” Bernanke said at a forum at the Chicago Fed’s Detroit office. “High unemployment imposes heavy costs on workers and their families, as well as on our society as a whole.”
Hewlett-Packard Co., the world’s largest personal-computer maker based in Palo Alto, California, this week said it’ll slash about 3,000 jobs over several years.
The slower pace of hiring came as colleges and universities began sending a wave of more than 1.6 million men and women with new bachelor’s degrees into the labor force. Analysts said the scramble for jobs may depress pay and handicap future career opportunities for the recent graduates.
Not all the data today was bleak. Earnings per hour for those with jobs climbed 0.3 percent on average to $22.57 last month. Pay rose 1.9 percent from May 2009, up from a 1.8 percent increase in the year to April.
“Today’s report may be the normal volatility seen in payroll jobs as the economy transitions from firing workers to hiring workers,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UJF Ltd. in New York, said in a note to clients. “The labor markets are still in recovery mode.”
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 16.6 percent from 17.1 percent.
The number of temporary workers increased 31,000, an eighth consecutive gain. Employment at temporary-help agencies often picks up before companies take on permanent staff.
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