US adds 175,000 jobs in May, stocks rise

WASHINGTON, USA – The US economy added a modest 175,000 jobs after a surge of entrants into the labor force in May, the Labor Department announced on Friday, June 7, and dispelling worries that job creation had slumped in the spring.

The net new jobs figure was better than expected by analysts and a firm gain from April’s 149,000 net new jobs.

The unemployment rate pushed up a bare 0.1% points to 7.6%, while the number of Americans officially jobless was essentially unchanged at 11.8 million.

But that was underpinned by numbers that should give added confidence in the economy’s strength:

• the labor force grew by 420,000 last month
• the number of those who have dropped out of the labor force fell by 231,000
• the number of Americans working part-time by default fell by 12,000.

Economists had lowered their expectations for the economy’s capacity to add new positions amid worries about the impact of government spending cutbacks, Europe’s continued recession, and weakness in the Chinese economy.

So the May numbers surprised on the upside.

Nevertheless, the number of jobs created was still lower than the 193,000 a month average for the first 4 months of the year, and was seen as not strong enough to press the Federal Reserve to begin reeling in its quantitative easing stimulus program in the immediate future.

“Decent but not fabulous,” Jennifer Lee of BMO Capital markets characterized the report.

US bond yields had surged over the past month in anticipation that the economy was growing strongly enough to put the Fed on the verge of beginning cuts to its $85 billion a month bond purchases, which are aimed at holding interest rates lower to boost activity.

Friday’s jobs report was then widely awaited as a signal of whether that interpretation was right.

Some analysts said it likely fell slightly short of what the Fed needs to begin slowing its policy, but bond and currency markets read the data as still headed in that direction.

The dollar strengthened a half-cent against the euro, to trade at $1.32 per euro, and the 30 year US treasury bond yield jumped to 3.30% from 3.25% late Thursday, June 6.

Stocks rise

Stocks — which had fallen in recent weeks on expectations that the Fed would begin tightening — contrarily opened higher on the news Friday.

Ten minutes into trade, the Dow Jones Industrial Average was up 49.87 points or 0.33% to 15,090.49

The broad-based S&P 500 put on 4.95 points or 0.31% to 1,627.51, while the tech-rich Nasdaq Composite Index added 6.60 points or 0.19% to 3,430.65.

Briefing.com analyst Patrick O’Hare said the jobs report “reflects improvement in the economy, but not so much improvement as to suggest the Fed will alter its policy course.”

A market note from Charles Schwab & Co. characterized the jobs report as “lukewarm” that was “tempering Federal Reserve asset purchase tapering talk.”

Harm Bandholz of UniCredit Economics said the 175,000 figure was in the low range of what the Fed probably wants to see each month to head for a trimming of QE.

“What is still missing, though, is the confirmation that the improvement is sustained.” – Rappler.com