Unemployment Rate Rises as US Creates 175,000 Jobs in May

Companies hired more people than expected in May, signaling that the U.S. economy is growing slowly, although the unemployment rate edged upward as more workers were seeking employment.

In the highly anticipated non-farms payroll report, the Labor Department said Friday morning that the U.S. added 175,000 jobs in May, modestly more than the 168,000 economists were predicting.  The unemployment rate climbed to 7.6 percent from 7.5 percent in April, against the consensus that it would hold steady at 7.5 percent.

Meanwhile April’s figure was revised downward to 149,000 new jobs from an originally reported 165,000.  The figure for March was upwardly revised from 138,000 to 142,000.

The average workweek was flat at 34.5 hours.  Employment rose in professional and business services, food services and drinking places, and retail trade.

The unemployment rate rose as the workforce population, people that either have jobs or are actively looking for work, grew to 63.4 percent as 420,000 people entered the labor market.  It was the first time that the participation rate increased since last October.  Compared to May last year, the labor force participation rate is down 0.4 percent.

The stock markets have been extremely volatile this week as investors awaited the key report after getting mixed signals from other reports earlier this week.  Many investors feel that a strong jobs report will lead to the Federal Reserve tapering its quantitative easing policies that include extremely low interest rates and $85 billion per month in purchases of Treasuries and mortgage-backed securities.

Data processing firm ADP said on Wednesday that the nation added a disappointing 135,000 jobs in May.  The ADP report is meant to align with the final revision of the Labor Department for the month (which comes in two months), although ADP has a history of mixed success for accuracy.

On Wednesday, the Labor Department said that first time filings for jobless benefits decreased by 11,000 to 346,000 in the week ended June 1.  This topped economist expectations.

The latest report is simply going to make it even harder to gauge potential moves of the Federal Reserve.  For the sake of the nation, it would be a far better thing to see more than 200,000 jobs created in a month.  However, a strong report like that would likely support the contentions of several Federal Reserve officers to put the brakes on stimulus.  A much weaker report would have supported keeping the gas on easing policies, but may have sparked greater concerns about the overall strength of the economy, especially when coupled with weak manufacturing data of late.

Looks like the report pretty much hit the sweet spot for Wall Street; just good enough and just bad enough to show a growing economy that still needs the Fed crutch.

After a 200 point swing in Thursday trading to stop a two-day skid, equities are coming out strong on Friday with the Dow Jones Industrial Average ahead by 66 points, the S&P 500 up 8 points and the Nasdaq trading ahead by 10 points shortly after the opening bell.