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Jobs report signals possible slowdown in U.S. economy

Hiring cooled off considerably in May in what could be a warning sign that the U.S. economy is slowing down.

The U.S. added 75,000 jobs last month, and the gains in March (153,000) and April (224,000) were revised downward by a combined 75,000 jobs, the U.S. Department of Labor reported on Friday. The national unemployment rate held steady at 3.6 percent and wages increased compared to the prior month, however.

jobsmayHousing and mortgage economists gave a mixed assessment of the latest jobs report.

“Economic growth is clearly slowing, as indicated by the slower pace of job growth in May, downward revisions in prior months, and a leveling out of wage growth,” said Mike Fratantoni, chief economist for the Mortgage Bankers Association. “The job market remains tight, but this report, coupled with other recent data, shows a distinct cooling of the economy this spring.”

Fratantoni added that the outlook for home sales and mortgage activity this summer remains brighter than last year, however, given that mortgage rates have fallen recently.

“This slowdown in job growth somewhat offsets the benefits of lower mortgage rates, but we still expect modest growth in home sales and purchase-mortgage originations this year,” he said.

Fannie Mae chief economist Doug Duncan said the slowdown in hiring may be related to trade tensions and a weakening global economy.

“This morning’s jobs report is consistent with an economy that is continuing to slow from expansion highs,” Duncan said. “This relatively weak number may reflect some risk aversion on the part of employers in the face of increased uncertainty in the economy.”

On the positive side, Duncan said, the unemployment rate remains at a historically low level and average hourly wages rose by 3.1 percent year over year to $27.83. Month over month, wages rose by 6 cents in May. Duncan said the slowdown in hiring will probably keep Federal Reserve policymakers on a patient course in regard to rate changes.  

Among the sectors adding jobs were professional and business services (up 33,000) and health care (up 16,000), according to the labor department. The construction industry added 4,000 jobs.

Over the past three months, job gains have averaged 151,000 per month.

Lawrence Yun, chief economist for the National Association of Realtors, said the fact that the U.S. had another month of job additions should help fuel demand for housing.

“Seventy-five thousand net new jobs in May is not as strong as in prior months, but nonetheless implies continued economic expansion and solid consumer confidence,” Yun said. “In fact, it is nearly assured that America will have achieved the longest economic expansion ever in July of 121 straight months of economic growth.”


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