U.S. Unemployment Rate Spiked to 5.5% in May
U.S. Unemployment Rate Spiked to 5.5% in MayThe U.S. economy lost a further 49K jobs in May, though the decline was a touch less than the -60K expected by the markets. The unemployment rate rose to an astounding 5.5%, up from 5.0% in April. Net revisions for the month were -15K.
The U.S. economy lost a further 49K jobs in May, following the 28K jobs lost in April. The decline was a touch less than the -60K expected by the market, and was the fifth straight monthly decline in the ranks of the employed in the U.S. In fact, since January, the economy has lost a total of 324K jobs. However, despite the better print on the nonfarm payrolls, the spike in the unemployment rate from 5.0% in April to 5.5% in May, which brings the rate to its highest level since 2004, was a big surprise to the markets which were expecting a modest increase to 5.1%.
The details of the report were equally sobering. In particular, there was a further 57K drop in the number of people employed in the goods-producing sector, bringing the number of jobs lost for the year to date in that sector to 396K. On the other hand, the service sector - which has been the bulwark of employment creation in the U.S. - added a meagre 8K jobs, following the fairly reasonable 72K addition last month. At a further level of disaggregation, there were sizeable drops in construction (-34K), manufacturing (-26), retail trade (-27K), transportation (-10.5K) and professional services (-39K), while the public sector (+17K), education (+54K) and hospitality (+12K) posted fair-sized gains in employment. In fact, these gainers tend to be acyclical in nature, while hospitality may have been boosted by the weak U.S. dollar. It is also noteworthy that the job losses in the private sector during the month were 66K, up from the 44K decline in April.
On the wage front, the average hourly earnings rose by a modest 0.3% M/M, keeping the yearly gain flat at 3.5% Y/Y. Also of note is the fact that the number of hours worked remained flat in May, following the -0.3% M/M print in April.
The U.S. economy continues to shed jobs, though the losses are not of the magnitude that would suggest that a recession is at hand. We continue to believe employment conditions will deteriorate further. In the meantime, the spike in the unemployment rate should sufficiently spook the Fed so as to keep them from hiking in the near term as the market expects, though it is not yet sufficient proof for the Fed to revert to rate cutting.
TD Bank Financial Group
The information contained in this report has been prepared for the information of our customers by TD Bank Financial Group. The information has been drawn from sources believed to be reliable, but the accuracy or completeness of the information is not guaranteed, nor in providing it does TD Bank Financial Group assume any responsibility or liability.
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