Another U.S. jobs report, another round of shock and disappointment. On June 4, the government reported that employers added a paltry 38,000 workers in May—far fewer than the 155,000 expected. While the unemployment rate dipped to 4.7%, the number of job hunters is at its lowest since 2007 because 458,000 people gave up on finding work last month alone. Lack of confidence in the recovery could have a near-term economic impact. Here’s how:
Uncertain recovery There’s a chance May was just a statistical blip; the report has a margin of error of 100,000 jobs and classified 35,000 then striking Verizon workers as unemployed. Other indicators have been positive, such as rising gross domestic product and a bump in average hourly earnings. Even so, the monthly jobs gain was far below the past two years’ average of 240,000.
Steady interest Federal Reserve officials indicated that they would hike interest rates for the first time since December (and the second time in over seven years) at the mid-June meeting if employers continue adding jobs. But since the Fed looks to employment rates as crucial economic indicators—and Fed governor Lael Brainard called the latest report “sobering”—the decision will likely be put off until July.
‘The Economy, Stupid’ The economy typically affects swing voters, and a dour picture drives votes away from the incumbent party. So the latest report doesn’t look good for Democrat Hillary Clinton. Seizing on this, GOP candidate Donald Trump called the numbers a “bombshell.” Yet since voters care most about wages, which are still rising, any political effects of the report aren’t clear-cut.