US companies add more jobs

Published: 11 June 2013
New York - Hiring by US firms was sluggish in May while a sharp rise in mortgage interest rates last week weighed on what had been a buoyant housing market, adding to signs the economy had lost some momentum in the second quarter.

A separate report from the Federal Reserve characterised the pace of the economic expansion as "modest to moderate" since mid-April as hiring remained relatively subdued.

The Fed's Beige Book of economic conditions is prepared as research for policymakers to use at their next meeting on June 18-19, a meeting that will be watched for any indications as to when the Fed may pull back on its stimulus programme.

Private employers added 135 000 jobs in May, the ADP national employment report showed, an acceleration from April but missing forecasts for a gain of 165 000.

April's private payrolls were revised to an increase of 113 000 from the previously reported 119 000 gains.

"The number was weak," said Mark Zandi, chief economist at Moody's Analytics, which jointly developed the report.

"The data is suggesting that instead of job growth stepping up, it's actually stepping down as we move into the summer months," Zandi told reporters.

"It's not like we're falling off a just feels like we're throttling back a little bit."

The ADP report showed manufacturers had shed payrolls in May and a separate report indicated jobs growth in the vast services sector was weak last month, with a gauge of employment at services firms falling to its lowest in close to a year.


Economic growth is expected to cool in the current quarter from the 2.4% rate in the first three months of the year, partly due to fiscal belt-tightening in Washington.

Economists still largely expect the recovery should regain traction in the second half of the year.

The goods producing sector cut 3 000 jobs in May, with a drop of 6 000 positions at manufacturing firms, which could be partially due to defence spending cutbacks, Zandi said.

Wall Street was down over 1% by mid-afternoon, while the weak data helped push Treasury debt prices higher.

The dollar was weaker against a basket of currencies.

Activity in the US services sector picked up slightly in May, with the institute for supply management's services index edging up to 53.7 last month from 53.1 in April and that topped economists' expectations for 53.5.

A reading above 50 indicates expansion in the sector.

The May figure was still off this year's peak of 56.0, which was hit in February.

The forward-looking new orders component rose, but the employment measure slipped to the lowest level since last July at 50.1 from 52.0.

Even with the lacklustre growth, the services industry held up better than its manufacturing counterpart, which contracted in May, according to data from ISM released earlier in the week.

Data on Wednesday added to signs of a slowdown in manufacturing as new orders for factory goods rose in April but not enough to reverse the prior month's plunge.

In a busy day for economic releases, yet another report showed unit labour costs fell in the first quarter by 4.3%, the most in four years, although the reading appeared to be distorted by a shift in employee compensation at the end of last year to avoid a tax hike.

Nervousness the Fed may taper bond purchases sooner than had been expected, sent fixed 30-year mortgage rates up 17 basis points to average 4.07% in the week ended May 31, the Mortgage Bankers Association said.

Last week's interest rate was the highest since April 2012 and the first time rates have been above 4% since early May last year.

Demand for refinancing was hit hardest by the acceleration in rates, with applications slumping 15.0%.

The gauge of loan requests for home purchases - a leading indicator of home sales - held up relatively better, falling just 1.6%.
- Reuters
Tags: Jobs, Companies, US,


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