Post by Moses on Jun 3, 2005 20:58:25 GMT -5
Jobs data rekindle fear of slowdown in U.S.
By Edmund L. Andrews The New York Times
SATURDAY, JUNE 4, 2005
WASHINGTON U.S. job creation slowed to a crawl in May, the Labor Department estimated on Friday, but the unemployment rate edged down to its lowest point since September 2001.
U.S. employers added only 78,000 jobs in May, less than half the pace of the previous three months and the smallest monthly increase in nearly two years.
The report, far weaker than most analysts had expected, quickly rekindled talk of an economic slowdown along with speculation that the Federal Reserve would raise interest rates less than expected.
But analysts cautioned that the month-to-month job numbers often bounce wildly and are much less meaningful than the average pace over six months or a year.
Over the past year, the United States has added an average of 180,000 jobs a month. That pace has slowed to about 158,000 jobs a month since February, a trend that economists say is in line with other indicators of slower but continued economic growth.
The extraordinary reluctance to hire in May was partly a rebound from the torrid pace in April, when employers added 274,000 people to their payrolls.
"The economy has slowed from its strong pace, but the data have been so strange and volatile that it is unclear what its true condition is," said Joel Naroff, president of Naroff Economic Advisers in Holland, Pennsylvania.
The Labor Department said that the number of nonfarm payroll jobs, based on its survey of 400,000 work sites, was essentially flat in most industries.
Manufacturing companies shed 7,000 jobs in May, and have eliminated 67,000 jobs since last August. The results highlighted the apparently permanent decline in factory employment as a result of rising productivity and increased outsourcing of production to China and other low-wage countries.
Only a few industries added significant numbers of workers. One was health care, which has been expanding faster than the overall economy for years and added 26,000 jobs in May.
The other big area was residential home construction, which added 20,000 jobs, and provided further evidence of the economy's dependence on the housing boom.
But there were other indicators that the labor market continues to expand. The unemployment rate edged down to 5.1 percent in May, compared with 5.2 percent in April, even as greater numbers of people entered the work force.
Hourly wages for production and nonsupervisory workers climbed about 3 cents an hour, to $16.03, and have climbed about 2.6 percent over the past year. Still, that was less than the rate of inflation.
Richard Berner, chief U.S. economist at Morgan Stanley, said that the American labor market still appears to be expanding at a moderate pace.
"When you peer through the fog of volatility in these data, the labor markets are continuing to improve," Berner said. "The economy is fine."
Despite the unexpected hint of new economic weakness, analysts said that the jobs data were unlikely to affect the Federal Reserve's strategy of gradually raising short-term interest rates.
The Fed has raised its target for the federal funds rate on overnight loans between banks from 1 percent to 3 percent since June 2004, and it is all but certain to raise the rate another quarter-point at its next policy meeting on June 30. Most Fed officials have continued to signal that interest rates are still below the "neutral" level that would prevent a resurgence of inflation.
Consumer prices, excluding food and energy, have climbed by slightly more than 2 percent over the past year. Perhaps more important, employment costs have risen sharply largely as a result of higher costs for employee health insurance.
On Thursday, the Labor Department estimated that unit labor costs, the cost of labor to produce a dollar's worth of production, climbed 3.3 percent in the first three months of 2005.
Fed officials consider labor costs an important indicator of looming inflation, and they have made it clear in public pronouncements that they were more worried about inflation than about slower economic growth.
By Edmund L. Andrews The New York Times
SATURDAY, JUNE 4, 2005
WASHINGTON U.S. job creation slowed to a crawl in May, the Labor Department estimated on Friday, but the unemployment rate edged down to its lowest point since September 2001.
U.S. employers added only 78,000 jobs in May, less than half the pace of the previous three months and the smallest monthly increase in nearly two years.
The report, far weaker than most analysts had expected, quickly rekindled talk of an economic slowdown along with speculation that the Federal Reserve would raise interest rates less than expected.
But analysts cautioned that the month-to-month job numbers often bounce wildly and are much less meaningful than the average pace over six months or a year.
Over the past year, the United States has added an average of 180,000 jobs a month. That pace has slowed to about 158,000 jobs a month since February, a trend that economists say is in line with other indicators of slower but continued economic growth.
The extraordinary reluctance to hire in May was partly a rebound from the torrid pace in April, when employers added 274,000 people to their payrolls.
"The economy has slowed from its strong pace, but the data have been so strange and volatile that it is unclear what its true condition is," said Joel Naroff, president of Naroff Economic Advisers in Holland, Pennsylvania.
The Labor Department said that the number of nonfarm payroll jobs, based on its survey of 400,000 work sites, was essentially flat in most industries.
Manufacturing companies shed 7,000 jobs in May, and have eliminated 67,000 jobs since last August. The results highlighted the apparently permanent decline in factory employment as a result of rising productivity and increased outsourcing of production to China and other low-wage countries.
Only a few industries added significant numbers of workers. One was health care, which has been expanding faster than the overall economy for years and added 26,000 jobs in May.
The other big area was residential home construction, which added 20,000 jobs, and provided further evidence of the economy's dependence on the housing boom.
But there were other indicators that the labor market continues to expand. The unemployment rate edged down to 5.1 percent in May, compared with 5.2 percent in April, even as greater numbers of people entered the work force.
Hourly wages for production and nonsupervisory workers climbed about 3 cents an hour, to $16.03, and have climbed about 2.6 percent over the past year. Still, that was less than the rate of inflation.
Richard Berner, chief U.S. economist at Morgan Stanley, said that the American labor market still appears to be expanding at a moderate pace.
"When you peer through the fog of volatility in these data, the labor markets are continuing to improve," Berner said. "The economy is fine."
Despite the unexpected hint of new economic weakness, analysts said that the jobs data were unlikely to affect the Federal Reserve's strategy of gradually raising short-term interest rates.
The Fed has raised its target for the federal funds rate on overnight loans between banks from 1 percent to 3 percent since June 2004, and it is all but certain to raise the rate another quarter-point at its next policy meeting on June 30. Most Fed officials have continued to signal that interest rates are still below the "neutral" level that would prevent a resurgence of inflation.
Consumer prices, excluding food and energy, have climbed by slightly more than 2 percent over the past year. Perhaps more important, employment costs have risen sharply largely as a result of higher costs for employee health insurance.
On Thursday, the Labor Department estimated that unit labor costs, the cost of labor to produce a dollar's worth of production, climbed 3.3 percent in the first three months of 2005.
Fed officials consider labor costs an important indicator of looming inflation, and they have made it clear in public pronouncements that they were more worried about inflation than about slower economic growth.