U.S. Unemployment Rate Jumps to 9.4%
The U.S. labour market continued to weaken in May, although the pace of decline slowed significantly. Non-farm payroll employment fell by 345,000, a much smaller drop than expected, with the consensus looking for a 520,000 jobs loss. Declines in previous months were revised lower, with April's drop coming in at 504,000 (from 539,000) and the number of jobs lost in March being trimmed back to 652,000 from the earlier reported 699,000. The household survey showed a decline of 437,000 in employment, more than reversing April's surprising 120,000 increase. The labour force increased by 350,000 and the unemployment rate jumped to 9.4% from 8.9% in April.
May's decline was broad-based, although the goods sector recorded a larger share of the month's job losses. Notably, 156,000 manufacturing jobs were cut, with the auto industry accounting for about 20% of the losses. Jobs in construction were also cut back by 59,000. Service sector employment fell by 120,000 with transportation and professional business services posting hefty declines. Government jobs fell by 7,000 following the 92,000 increase on the back of hiring of temporary census workers.
The overall workweek was down to 33.1 hours from 33.2 in April with the manufacturing sector showing a sharper decline to 39.3 hours from 39.5. Overtime hours were steady at 2.7 hours. The index of weekly hours fell 0.7% in May and was down at a 6.3% annualized rate in April/May relative to the first quarter. While still a strong decline, this measure showed an improvement from the 8.9% annualized drop in the first quarter and the -7.5% pace in the fourth quarter of 2008.
Weakening employment continued to exert downward pressure on the average hourly earning measure, the key wage measure in the report, which recorded a small 0.1% increase. This contributed to the year-over-year rate dropping to 3.1%, well below the recent peak pace of 3.9% in December of last year.
The “less-bad” thesis was alive and well in today's report with May's decline being the smallest since September of last year and the smaller declines being reported March and April. While it is hard to argue that the number of jobs lost in May is good news, the report highlights that the pace of decline is slowing, although the sharp monthly increases in the unemployment rate continue.
The number of jobs lost during this recession has been massive and May's report still signals that the U.S. economy remained in a deep economic funk in the second quarter. Despite the steady deterioration in the labour market, household confidence has started to improve, buoyed by the low level of interest rates and increasing take-home pay as the Obama tax cuts took effect.
The key for the recovery will be whether or not these factors will be enough to support further improvements in confidence and eventually a recovery in spending, For its part, the Fed will remained focused on keeping monetary conditions very accommodative, with the recent increase in long-term rates supporting the case for the central bank to expand its quantitative easing initiative.
RBC Financial Group
http://www.rbc.com
The statements and statistics contained herein have been prepared by the Economics Department of RBC Financial Group based on information from sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. This report is for the information of investors and business persons and does not constitute an offer to sell or a solicitation to buy securities.
|
