No Go For June Rate Hike On Bumpy Jobs Report

To paraphrase some thoughts that ran earlier in this space: rate hike, no rate hike, now rate hike, nope rate hike?

The jobs numbers reported on Friday (June 3) were dismal, to put it mildly, with a paltry showing of 38,000 new additions to the workforce in May and an exacerbating revision that showed job creation over the previous two months at 59,000 fewer positions than had been estimated. The end result — at least for Friday when economists’ estimates had the net jobs number at +162,000 — was that the market was down, though admittedly not as much as some might have expected. OK, make that not as much as anyone might have expected. The broad measure, known as the S&P Index, was down a relatively meager 30 basis points.

Not bad when you think of how lousy those job numbers look when stacked up against a run rate that was in the triple digits. The data points of one month, or even two, do not a trend make, but nonetheless, the numbers should perk up some worry among those who watch job trends, which should be all of us. The implication is that the economy is slowing, as borne out by a rolling average that shows job creation at roughly 116,000 jobs monthly, where, over the past five years, that had been at 150,000 to 250,000 new jobs.

For the smallest businesses, the numbers must be sobering. For a pace of hiring to slow this markedly — if it should continue — means that there may be concern burning like embers over future business prospects. But could it be a full-blown conflagration? One hint: Both the enterprise survey of job growth and the household survey of employment growth were weak, but the continued strike by Verizon workers hit numbers, too.

The Wall Street Journal noted that all of these figures are imprecise estimates and that the margin of error with these reports is typically plus or minus 100,000 jobs, which swamps the latest data and then some. The unemployment rate is low, pegged by some estimates at less than 5 percent, but that does also mean that many people have stopped looking for work. The jury’s still out.

The odds of a rate hike may have shrunk, at least into July. Inflation remains lukewarm — just this side of tepid, at about 1.6 percent, with a potential Brexit looming. So, yet again, stocks seem a haven for investors.