WASHINGTON – Job growth faltered in May, with employers boosting payrolls by just 75,000. Yet the nation's unemployment rate dipped to 4.6 percent, the lowest since the summer of 2001.
The latest snapshot, released by the Labor Department on Friday, offered a mixed picture of the jobs climate. Wage growth, meanwhile, slowed, a development that should ease concerns about inflation getting out of hand.
The count of new jobs generated last month — 75,000 — was the smallest since October, when hiring practically stalled as companies were jolted by fallout from the Gulf Coast hurricanes. Job gains for March and April turned out to be weaker than previously reported.
On the other hand, the unemployment rate dropped a notch from 4.7 percent in April to 4.6 percent in May, the lowest since July 2001.
Taken together, economists said the report provides fresh evidence that overall economic growth is moderating to a more sustainable pace that should held keep a lid on inflation. The new employment figures increase the likelihood that the Federal Reserve might leave interest rates alone in June, taking a pause in its two-year rate-raising campaign, analysts said.
"With payrolls on the soft side and the unemployment rate on the strong side, together they paint a picture of economic growth this is slowing but that is just about right to avoid accelerating inflation," said Mark Zandi, chief economist at Moody's Economy.com.
On Wall Street, stocks were mixed. The Dow Jones industrials were off 29 points, while the Nasdaq was up 2 points in morning trading.
The payrolls figure and the unemployment rate come from two different statistical surveys, which can provide — as in Friday's case — a somewhat conflicting picture of what is happening in the labor market.
The seasonally adjusted overall civilian unemployment rate — 4.6 percent in May — is based on a survey of 60,000 households. It showed that 288,000 people said they found employment last month, outpacing the number of people who couldn't find work.
Economists tend to put more stock, however, in the much broader business survey of 400,000 work sites that is used to calculate the payroll figures.
In May, job cuts at factories, retailing and other fields tempered job gains in education and health care, financial activities and elsewhere.
The payrolls performance was much weaker than the 170,000 jobs that economists were forecasting would be added in May. They also were predicting the unemployment rate to hold steady at 4.7 percent.
Adding to the weakness in the payroll picture: job gains for both March and April were lowered. Employers actually added 126,000 new jobs in April, instead of the 138,000 previously reported. For March, employment grew by 175,000, rather than 200,000.
In other economic news, the Commerce Department reported that orders placed with U.S. factories fell 1.8 percent in April, another sign the economy was losing momentum in the spring.
The reports come as President Bush is coping with low job-approval ratings. Trying to breath life into his economic agenda, Bush earlier this week tapped Wall Street veteran Henry Paulson, chief of Goldman Sachs (GS), to be the next Treasury secretary.
Workers' average hourly earnings stood at $16.62 in May, a small 0.1 percent increase from April. That was smaller than the 0.3 percent rise economists were expecting and marked a moderation from a sharp pickup in earnings registered in April.
Wage improvement is good for workers but a rapid, sustained acceleration can ignite inflation concerns.
To thwart inflation the Federal Reserve in May bumped up a key interest rate for the 16th time since June 2004, when the central bank embarked on its credit-tightening campaign. Economists said Friday's report boosts the odds that the Fed will leave rates alone at its next meting, June 28-29. Others, however, still predict another rate increase will come at that time.
Economic growth in the April-to-June quarter is expected to moderate as rising borrowing costs, lofty energy prices and a slowdown in the housing market take their toll on consumers and, to a lesser extent, businesses.
Given Friday's employment figures, economists were lowering second-quarter growth forecasts to around 2.5 percent. That would mark a deceleration from the brisk 5.3 percent pace logged in the first quarter of this year.
Oil prices, which hit a record high of more than $75 a barrel in late April, are now hovering above $71 a barrel. Gasoline prices have topped $3 a gallon in some areas.
Other economic barometers offered a mixed picture for May. Manufacturing activity lost a bit of momentum. Consumer confidence sagged. But many retailers reported better than expected sales, suggesting that most shoppers are still spending with some gusto despite high energy prices.
The report also showed the average time that the 7 million unemployed spent searching for work in May was 17.1 weeks. That was up from 16.8 weeks in April and was the highest since February.