Labor’s Mixed Results: Jobs Spiked But Unemployment Rose

The U.S. Department of Labor released its monthly employment situation report on Friday, which showed that United States employers added a better-than-expected 175,000 jobs in May. This announcement further supported the thesis that the labor market has been remarkable resilient to the uneven gains made by the economy so far this year. However, as with all economic data recently, the report contained both good and bad news. Despite the 175,000-job gain, the unemployment rate rose back up to 7.6 percent from 7.5 percent, an unexpected jump.

In fact, the Labor Department said that last month the labor force — which includes people working and searching for employment — increased by 420,000.

Still, the numbers were better than many economists had expected; the consensus forecast was set at a 165,000-job gain for May, a level that would have surpassed the 142,000 jobs added in March and the 149,000-job gain recorded in April. Many economists had even lowered their estimates this week after payroll processor ADP announced that businesses created just 135,000 new jobs in May. That data created an dim picture of labor market gains, especially since the the Affordable Care Act’s mandate for businesses with at least 50 employees to provide health insurance beginning next year is also expected to decrease hiring.

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Recent economic reports — including the three straight weeks of jobless-claims increases in the middle of May — had stirred fears that the $85 billion in across-the-board federal spending cuts and the January payroll tax hike were pushing the surprisingly strong job market into its fourth consecutive mid-year slump.

But other economists have been heartened by the fairly steady decline in layoffs; employers announced just 36,398 job cuts last month, a 4.5 decrease from the 38,121 cuts made in April, according to the outplacement consultancy firm Challenger, Gray & Christmas. Additional, even though the number of initial jobless claims spiked temporarily in May, overall, first-time unemployment claims have been trending down for months, which typically indicates healthy job growth. In the week ended June 1, the number of Americans applying for jobless claims dropped by 11,000 to 346,000.

The effect of the austerity measures was evident in the results; businesses added a total of 178,000 jobs, while federal, state, and local governments cut 3,000. However, the recovering housing market, improved household finances, and the ongoing low interest rates held in place by the Federal Reserve have largely offset Washington’s budget cuts.

Additional good news for the labor market came from the Federal Reserve Bank of Chicago on Thursday. The bank’s economists said that payroll gains of 80,000 per month will be adequate to keep the United States jobless rate steady over the next couple of years as population growth slows and aging baby boomers retire. “These estimates are lower than the conventional wisdom that 100,000 to 150,000 jobs per month are needed to lower the unemployment rate,” Daniel Aaronson, director of microeconomic research at the Chicago Fed, and Scott Brave, a senior economist, wrote in a report dated July 2013.

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