Asia-Pacific

US employment growth slows sharply in May

(Agencies)
Updated: 2011-06-03 22:05

WASHINGTON -?Employers hired far fewer workers than expected in May and the jobless rate rose to 9.1 percent as high energy prices and the effects of Japan's earthquake bogged down the economy.

Nonfarm payrolls increased 54,000 last month, the weakest reading since September, the Labor Department said on Friday. Private employment rose just 83,000, the least since last June, while government payrolls dropped 29,000.

Economists had expected payrolls to rise 150,000 and private hiring to increase 175,000 in May. The government revised employment figures for March and April to show 39,000 fewer jobs created than previously estimated.

The job creation slowdown confirmed the economic weakness already flagged by other data from consumer spending to manufacturing. It could stoke fears about the depth and duration of a slowdown that started early in the year.

"It is likely that this will be a soft patch in the coming months but overall it will probably be a soft patch rather than a double-dip recession or something worse," said Sean Incremona an economist at 4CAST in New York.

The Labor Department said severe weather last month, including tornadoes and flooding, in the Midwest and the South did not materially affect data collection.

It also said that while some workers in those regions may have been temporarily displaced from their jobs, it found "no clear impact of the disasters on the national employment and unemployment data for May."

The employment report provides one of the best early reads on the health of the US economy and it regularly sets the tone for global financial markets.

US stock index futures fell sharply, while Treasury debt prices added to earlier gains and interest rate futures rose, signaling that traders believe the Federal Reserve will stick with its ultra-low rate policy for a while.

The dollar fell against the yen and Swiss franc.

While the recent string of weak data has sparked talk about the need for the Fed to extend its asset purchasing program when it expires this month, analysts believe policymakers will take the soft payrolls report in stride.

Officials at the US central bank regard the current downshift in the economy as temporary.

The Fed has been mapping out a strategy on how to start removing some of the massive stimulus it has lent the economy, and officials have made clear the bar for a further easing in monetary policy is high.