Monthly job gains are fewest in five years

The May jobs report, released this morning, showed that the economy only added 38,000 jobs last month, much lower than the 150,000 expected by economists and analysts.

The unemployment rate decreased by 0.3% in May, declining to 4.7%, showing that 7.4 million Americans who wanted a job couldn’t find one last month. That was the lowest level since November 2007 but largely reflected more people dropping out of the workforce. In fact, the labor force participation rate declined by 0.2% to 62.6% in May – this brought the total three month decline to 0.5%, essentially erasing any gains in the labor force participation rate since last fall.

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Monthly changes in specific industries also showed that almost the entire gains in this month’s report was due to growth in the health/education services sector (+48,000). The health and education sector has been the strongest component of job gains over the past 12 months, with nearly half a million jobs added since June 2015. Manufacturing (-18,000) and information (-34,000) showed significant decreases in employment.

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In addition, The change in total nonfarm payroll employment for March was revised from +208,000 to +186,000, and the change for April was revised from +160,000 to +123,000. With these revisions, employment gains in March and April combined were 59,000 less than previously reported. With May’s job report, the economy has essentially shed 21,000 jobs over the past three months.

Economist’s reactions to the jobs report indicate that there is a likelihood that the Federal Reserve will hold off on their proposed interest rate hike for at least a month, perhaps even until September. Some analysts are concerned that this report may be a leading indicator of significantly sluggish growth in the labor market over the near-term, while others pointed to the stable (if not slow) GDP growth as indications that this report is an aberration.