US employers cut 345,000 jobs last month, significantly fewer than the 520,000 losses forecast by economists, according to data released by the Labor Department on Friday. Job loss estimates ranged from declines of 450,000 to 600,000, according to a Bloomberg poll.
The decline in payrolls was the smallest decrease in eight months, and comes after a revised loss of 504,000 jobs in April, compared with a previously reported loss of 539,000.
Meanwhile, the jobless rate increased from 8.9 per cent to 9.4 per cent, the highest since 1983 and greater than the median forecast of 9.2 per cent.
John Kemp, formerly an economist at Sempra Metals and now a Reuters columnist, said the report indicated the worst of the downturn was now over:
The data is consistent with recent business surveys suggesting the pace of contraction is slowing, and the turning point in the economic cycle is drawing near.
The relatively small decline in nonfarm payrolls should be reflected in a smaller decline in industrial output when the Federal Reserve reports its May 09 estimate later this month (not least because the Fed bases its estimate, in part, on the payroll data).
In the past two months, the data flow has become consistently positive, in the sense that it points to a slower rate of decline and a nearing end to the contraction phase of the cycle, helping fuel the broad-based rally across equity and commodity markets. Today’s data will reinforce that optimism, and has already sent WTI futures (briefly) back above $70.
(Un)-employment is a lagging indicator. Job losses are likely to continue even once the economy starts to expand again and will act as a (moderate) drag on growth going forward (as well as contributing to further defaults on home mortgages and consumer lending over H2 2009 and throughout H1 2010).
But the payrolls report does indicate the worst of the downturn is now over.