ARLINGTON, Va.—The anemic U.S. employment numbers reported for May, which were just 38,000 and were the smallest monthly gain since September 2010, makes an interest rate hike unlikely for June, according to NAFCU Chief Economist and Director of Research Curt Long.
The unemployment rate dropped to 4.7% in May as the labor force shrunk by 458,000 workers.
“The unemployment rate fell, but for the wrong reason as labor force participation declined for the second consecutive month,” said Long. “The participation rate had been trending up during the fourth quarter of 2015 and the first quarter this year, but almost all of those gains were lost during April and May. Wage growth was modest, but the overall trend remains positive.
“As for the Fed, this likely puts an end to the hopes of a rate hike in June,” Long continued. “July remains a possibility if there is a rebound in next month’s employment data, but it is more likely that the committee will wait until the third quarter or beyond.
“This was an unqualified dud of a jobs report . . .” said Long. “It's a pretty gloomy report, hard to find a silver lining in this one.”
Long said that comments from Federal Reserve Chair Janet Yellen at the World Affairs Council of Philadelphia Monday indicate that a July hike may not occur, as well.
“Chair Yellen’s comments were guardedly optimistic,” said Long. “Nevertheless, she noted the numerous sources of uncertainty that the FOMC will be considering at its policy-setting meeting later this month. Moreover, she made no indication that policy move is likely ‘in the coming months’ as she did previously. Where the next rate hike is concerned, it appears that June is effectively off the table and July is looking more doubtful.”