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Economy in Brief

U.S. Employment & Wage Growth Slowed
by Tom Moeller June 2, 2006

Nonfarm payrolls rose a modest 75,000 during May, the weakest increase since last October. Moreover, job gains during the prior two months were revised down by a cumulative 37,000 while the May gain fell short of Consensus expectations for a 175,000 rise.

Despite the weak jobs figures from the establishment survey, the household survey indicated a drop in the unemployment rate to 4.6% which compared to Consensus expectations for m/m stability at 4.7%. Employment rose 288,000 (1.7% y/y) and the labor force rose 180,000 (1.2% y/y).

Private sector payrolls grew 67,000 (1.6% y/y) during May while government employment rose 8,000 (0.7% y/y).

Private service-producing jobs rose 77,000 (1.6% y/y) last months after a downwardly revised 72,000 rise in April. For the twelve months ending March, these jobs were rising an average 131,000 per month. May jobs in retail trade fell 27,100 (-0.1% y/y) again reflecting broad based sector declines. Financial sector jobs rose 12,000 (2.7% y/y) and professional & business services employment rose 27,000 (2.7% y/y). Temporary help services jobs fell by 2,800 (+3.7% y/y), the fourth m/m decline this year. Jobs in education & health rose a firm 41,000 (2.4% y/y) but leisure & hospitality jobs increased just 4,000 (1.7% y/y).

Factory sector payrolls fell 14,000 after an unrevised 19,000 April increase. Employment in the motor vehicles & parts industries fell 9,700 (-1.7% y/y) and computer & electronics payrolls reversed all of the prior month's gain with a 4,6000 (+0.3% y/y) worker decline.

Construction employment increased just 1,000 (3.5% y/y) following monthly gains that averaged 22,000 during the prior year.

Growth in average hourly earnings moderated to 0.1% from an upwardly revised 0.6% rise during April. The slowdown exceeded Consensus expectations for a 0.3% increase. Private service-producing wages rose just 0.1% (4.2% y/y) following a 0.7% increase in April. Professional & business services wages were unchanged (5.7% y/y) after a 1.1% April jump while finance, insurance & real estate earnings fell 0.1% (4.6% y/y). Factory sector earnings were unchanged (1.6% y/y) after an upwardly revised 0.4% April gain.

Employment May April Y/Y 2005 2004 2003
Payroll Employment 75,000 126,000 1.4% 1.5% 1.1% -0.3%
  Manufacturing -14,000 19,000 -0.1% -0.6% -1.3% -4.9%
Average Weekly Hours 33.8 33.9 33.7 (May '05) 33.8 33.7 33.7
Average Hourly Earnings 0.1% 0.6% 3.7% 2.8% 2.1% 2.7%
Unemployment Rate 4.6% 4.7% 5.1% (May '05) 5.1% 5.5% 6.0%
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