Jobs report? Tepid, like everything else in the economy.
US adds 175,000 jobs in May, in line with expectations but not enough to reduce the unemployment rate. Elsewhere in the economy, manufacturing and construction disappoint, but jobless claims fall.
US adds jobs, but unemployment rate rises: The US economy added 175,000 jobs in May, but the unemployment rate ticked up slightly, to 7.6 percent. The number of jobs added was about what analysts expected, but employment needs to grow faster if the US expects to get its elevated unemployment rate back to more normal levels.
The jobs report, released Friday by the Department of Labor, answered several nagging questions about the economy. Will the Federal Reserve reduce the pace of its purchases of debt sooner than expected, pushing up interest rates? If job-creation doesn't pick up, the Fed's unlikely to reduce its program until next year, analysts say. Are federal budget cuts under the sequester hurting the labor market? They probably will, analysts say, but the national job numbers don't show much of an effect yet. Can the job market grow while the economy is in a soft patch? Yes, at a tepid pace.
A large segment of the jobs added in May were in the temporary sector, which tends to be a bellwether for the rest of the labor market. For more on the May jobs report, read Monitor reporter Ron Scherer's take.
Manufacturing disappoints: The ISM-Manufacturing Index for May sank slightly, to its lowest level in four years. Many of the biggest activity declines were in the United States. Many economists expect that manufacturing growth will slow, but not disappear entirely. “Becalmed still beats sinking,” Michael Montgomery, US economist with IHS Global Insight wrote in an e-mailed analysis. "It looks like a long, cool summer in the manufacturing sector."
Despite the US decline, manufacturing’s global outlook remained positive, but still weak.
Construction spending hits a snag: Construction spending increased 0.4 percent in April, while core construction spending (for single-family, multifamily, state and local government, and private nonresidential purposes) increased 0.9 percent. The increase was good news, but it came with a bit of bad: Construction spending estimates for February and March were revised downward, portending flat growth for the year. “Going forward, public construction spending is likely to drop through the end of this year because of budgetary problems state and local governments face, but turn in the first half of 2013,” Patrick Newport, US economist for IHS Global Insight, wrote via email. “The sequester will have small effects on the public construction numbers since federal spending accounts for only 10 percent of public construction.”
Despite the tepid report, the housing sector was cited as a bright spot in the Federal Reserve’s June “Beige Book,” a collection of economic information from on or before May 24.
Jobless claims fall: The number of people applying for initial jobless claims fell by 11,000 to 346,000 claims last week, a hopeful sign that the job market is gradually improving. The claims numbers have been up and down in recent weeks, but analysts think the numbers overall point to slow, steady gains.
The end of low mortgage rates? The average interest rate for a 30-year fixed rate mortgage jumped 16 percentage points to 3.91 percent last week. Following a year of historic lows, rates have been climbing steadily in recent weeks, a trend that seems likely to continue in the face of rising house prices, economic rebound, and the Fed potentially easing off its buying up of Treasury bonds, which kept rates quite low.