Transcripts

The Newest Employment Report Does A Job On Wall Street

SUSIE GHARIB: a much weaker than expected employment report today led to a volatile day on Wall Street. The Dow slipped 12 points. The NASDAQ lost a fraction and the yield on the 10-year Treasury tumbled to 5 percent. American businesses added the fewest number of workers in seven months, easing worries about inflation, but raising fresh concerns about economic growth. Erika Miller reports.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: The labor market faltered in May, with employers adding a meager 75,000 new jobs. Economists say it`s more evidence that growth is slowing sharply in the second quarter.

ETHAN HARRIS, US CHIEF ECONOMIST, LEHMAN BROTHERS: Clearly we have a weakening economy. It`s probably a little weaker than we`d like to see. A soft landing for the job market would be something in the order of 130,000 in job gains and this latest report shows only 75,000. So it`s little softer than we`d like to see.

MILLER: Non-farm payrolls posted their smallest gain since last October, when businesses were recovering from the Gulf coast hurricanes. In addition, the gains for the previous two months were revised lower. The unemployment rate, which is calculated in a separate survey, dipped from 4.7 percent in April to 4.6 percent last month. That`s the lowest level in almost five years. Hiring was concentrated in healthcare, education and professional services. Factories and retailers saw job cuts.

Also in today`s report, positive news about inflation. Average hourly earnings rose just a penny in May, or a 0.1 percent. That`s a big decline from April`s 0.6 percent increase. The big unknown on Wall Street is whether today`s data will encourage the Federal Reserve to hold off raising interest rates at its June 28 and 29 meeting.

BRIAN FABBRI, CHIEF ECONOMIST, BNP PARIBAS: By itself, probably not. But it certainly would convince all of the skeptics that, in combination with all of the other weak economic data, that the Fed should pause. The data is screaming pause.

MILLER: But others say it is not so easy to predict what the Fed will do.

HARRIS: The problem for the Fed is that they also have to look at the inflation picture. The inflation picture argues that they need to continue to hike interest rates. We think it`s a very close call, but we still think the Fed will do another hike in their June meeting.

MILLER: There`s still more economic data which could sway the Fed. In particular, economists are waiting for two key inflation reports, the consumer price index and the producer price index. Both are due out in the middle of the month. Erika Miller, NIGHTLY BUSINESS REPORT, New York.