United States employment growth slows, trade deficit rises to highest level since January

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02 June, 2017

The unemployment rate fell by 10 basis points to 4.3%, according to FactSet estimates, surprising analysts expecting the figure to hold steady.

One calendar quirk that may have depressed wage gains in May was that the 15th of the month-when workers who are paid semi-monthly get their checks-fell on the Monday after the survey week, which includes the 12th. "Notably, the three-month moving-average gain has steadily declined from about 200,000 in February to 121,000 in May".

The U.S. economy saw below-average job growth for the month, adding only 138,000 jobs, the Bureau of Labor Statistics reported.

The economy needs to create 75,000 to 100,000 jobs per month to keep up with growth in the working-age population.

Cooler hiring may partly reflect the challenge of finding skilled and experienced workers amid a tightening job market. The S&P 500 gained 3 points, or 0.12 percent, to 2,433.06 and the Nasdaq Composite added 30.10 points, or 0.48 percent, to 6,276.93.

The higher the percentage, the better, since people who participate in the labor force contribute the payroll and other taxes that help support many of those who do not work.

The closely watched employment report was released less than two weeks before the Fed's June 13-14 policy meeting.

Economists had expected an increase of about 185,000 jobs compared to the jump of 211,000 jobs originally reported for the previous month. It increased its key interest rate in December and March.

The U.S. central bank raised interest rates by 25 basis points in March.

Following the latest data, the Atlanta Federal Reserve's closely-watched GDP Now forecast model showed on Thursday that the USA economy is expected to grow at a 4.0 percent annualised pace in the second quarter.

The Atlanta Fed is forecasting GDP increasing at a 4.0 percent pace in the second quarter.

Spot gold rose 0.89 percent to $1,276.50 an ounce, its highest since April 25, headed for its fourth week of gains. Average hourly wages increased 0.2% to $26.22, in-line with estimates. But with the labor market expected to hit full employment this year, there is optimism that wage growth will accelerate.

February was the first jobs report during President Donald Trump's tenure, and since then the US economy has added 522,000 jobs.

There are, however, fears that political scandals could derail the Trump administration's economic agenda. It has rebounded from a multi-decade low of 62.4 percent in September 2015 and economists see limited room for further gains as the pool of discouraged workers shrinks.

"I wouldn't worry too much about monthly payrolls", Jim O'Sullivan, chief USA economist at High Frequency Economics in Valhalla, New York, said before the report.

Construction payrolls rose 11,000 last month.

Long-dated U.S. Treasury yields fell to almost seven-month lows while short-dated yields touched their lowest in more than two weeks after the U.S. employment data suggested a cautious Fed policy beyond June. Department store operators like J.C. Penney Co Inc, Macy's Inc and Abercrombie & Fitch are struggling against stiff competition from online retailers led by Amazon.

Government employment decreased 9,000 last month.


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