WASHINGTON: Hiring by US employers plunged in May to its lowest level in more than five years, a sign that businesses have turned cautious after the economy barely expanded in the first three months of the year.
The Labor Department said on Friday that employers added just 38,000 jobs last month, the fewest since September 2010. The figure was well below analysts' forecasts for a gain of around 150,000.
However, the unemployment tumbled to 4.7% from 5%. That is the lowest rate since November 2007.
The rate fell for a problematic reason: Nearly 500,000 unemployed Americans stopped looking for work, and were no longer officially counted as unemployed.
The disappointing figures will likely raise doubts that the Federal Reserve will increase its benchmark interest rate at its upcoming meetings in June and July. Many analysts had expected an increase by July.
It was also pointed out that the job total was affected by the more than 35,000 Verizon workers who were on strike and classified as unemployed by the Labor Department. They returned to work this week.
“Underlying job growth is going to be stronger than the overall number says,” Diane Swonk, an economist based in Chicago said before the figures were released. “It’s a little bit deceptive in the weakness.”
Even apart from the distortion created by the Verizon strike, the average monthly job gains so far in 2016 have fallen shy of the nearly 240,000 average of the last two years, a pace that has helped buoy the economy and cut the jobless figure in half since the height of the recession.
In recent weeks, Fed officials have been consistently signalling their intent to lift rates once it is clear that the economy is healthy enough to absorb an increase.