On Friday, the Labor Department reported that the economy added in 175,000 jobs in May. Economists had been expecting a rise of 165,000. The unemployment rate nudged slightly higher to 7.6%.
Over the past couple weeks, a number of economic indicators have shown that economic growth is slowing. Friday’s number is consistent with this, as the number of jobs created is at the level needed to keep pace with population growth. The Agency made a bid down-ward revision in estimated job growth over the last two months. It estimated that 12,000 fewer jobs were created in March and April than previously reported.
Hourly earnings were flat, rising just a penny from last month. Average hour worked were also flat, rising a tenth of a point. The unemployment rate rose slightly, as more people entered the labor force.
Friday’s report raises new questions about when the Fed will curtail the liquidity it has been pumping into the market. May’s jobs report, while not great, shows the labor market is at least stable. The increase Friday is in-line with average monthly job creation over the past year. The Fed may see this as a sign it can ease its way out of the market.
What happens then is anyone’s guess. The Fed has been priming the markets with around $85 billion a month in purchases. As the Fed scales that back, it is unclear whether investors will step in and support the current price-level of assets purchased by the Fed.
The jobs report is essentially a push. By itself, it tells us little about the overall state of the economy. We are in the 4th year of recovery out of the recession, and the economy’s tepid growth stumbles along for another month.