Job Hunters Face a Bleak Outlook

Job hunters face a bleak outlook, as employers cut their payrolls and the unemployment rated jumped to 5.5% in May. The ISM rose, but remains below the threshold for expansion for the fourth straight month. Factory orders also increased on strong orders for nondurable goods.

 

Employment Situation
The labor market shed 49,000 jobs in May, following a downwardly revised 28,000 job loss in May. Last month's loss was better than anticipated, as most analysts projected an even greater loss. Manufacturers and builders slashed payrolls by 26,000 workers. Overall, the service sector also lost jobs, with only education, leisure and hospitality, health services, and government sectors seeing growth. Average hourly earnings also increased to $17.94 from $17.89. Last, the unemployment rate surged 0.5% to 5.5%, the largest month-to-month jump since 1986.

 

ISM Index
The Institute for Supply Management's Purchasing Manager's Index (PMI) inched up 1.0 to 49.6 in May. For the fourth straight month, the PMI is below 50, the threshold for expansion. Looking at the components of the headline number, new orders surged 3.2 to 49.7. Production also increased to 51.2, up 2.1 from April. Backlogs plunged to 46.0 from 51.5. In the early stages of production, inflation still remains a concern as prices paid rose 2.5 points to 87.0. The current report implies that the manufacturing sector is still contracting even as the broader economy is growing modestly.

 

Factory Orders
Factory orders rose a greater than anticipated 1.1% in April after rising 1.5% in March. The strength of orders for nondurable goods shipments led the overall increase in factory orders, as it surged 2.8% in April. New orders for durable goods fell 0.6%. Orders for core capital goods--which are a proxy for business investment spending--increased at a rate of 4.0% for the month. Unfilled orders also grew at a rate of 0.9%. Inventories were effectively unchanged.