The Economy

U.S. Job Gains Lowest Since September 2010

The weak jobs report may make it tougher for the Federal Reserve to raise interest rates again this month.
Katie Kuehner-HebertJune 3, 2016

U.S. Federal Reserve officials’ decision whether to raise interest rates again this month just got tougher with news of the weakest job gains since September 2010.

The unemployment rate fell by 0.3 percentage point to 4.7% in May, and nonfarm employers added just 38,000 workers, the Labor Department said Friday.

While there was job growth in the healthcare industry, mining continued to lose jobs and a strike of about 35,000 Verizon workers who were not on the company’s payrolls affected numbers in the telecom industry.

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

CFO Insights on Inflation, Workforce Challenges, and Future Plans 

Download our 2022 survey report for a high-level view of finance team projections and strategies, directly from our CFO.com executive readers.

Economists surveyed by The Wall Street Journal had predicted payrolls would rise by 158,000 and the unemployment rate would hold steady.

For the previous two months, total nonfarm payroll employment growth for March was revised from 208,000 to 186,000, and the change for April was revised from 160,000 to 123,000. With those revisions, employment gains in March and April combined were 59,000 fewer than previously reported.

Over the past three months, job gains have averaged 116,000 per month, down from the average 219,000 growth over the prior 12 months.

Friday’s report was “the last major gauge of job-market health” before the Fed’s June 14-15 meeting, according to the WSJ.

“It leaves Fed policy makers with a difficult decision regarding the strength of the domestic economy as officials debate whether to increase borrowing costs for the first time in half a year, and only the second time in a decade,” the WSJ wrote.

“This is not a good report, and it may well give Fed officials second thoughts about increasing interest rates again this month or next, as some have suggested lately,” Peter Ireland, an economics professor at Boston College, told Reuters.

The Fed had indicated it would raise rates soon if job gains continued and economic data remained consistent with a pickup in growth in the second quarter.

“Boy, this is ugly,” Diane Swonk, an independent economist in Chicago, told The New York Times. “The losses were deeper and more broad-based than we expected, and with the downward revision to previous months, it puts the Fed back on pause.”

The Labor Department also reported the number of long-term unemployed (those jobless for 27 weeks or more) declined by 178,000 to 1.9 million in May.

Understanding Which ERP Modules Your Business Needs – And When