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Jobs creation slows dramatically with payrolls up just 75,000 in May, much worse than expected

Job creation decelerated strongly in May, with nonfarm payrolls up by just 75,000 even as the unemployment rate remained at a 50-year low, the Labor Department reported Friday.

The decline was the second in four months that payrolls increased by less than 100,000 as the labor market continues to show signs of weakening. Economists surveyed by Dow Jones had been looking for a gain of 180,000.


In addition to the weak total for May, the previous two months’ reports saw substantial downward revisions. March’s count fell from 189,000 to 153,000 and the April total was taken down to 224,000 from 263,000, for a total reduction of 75,000 jobs.

Stock futures fell and bond yields dropped in reaction to the report. Dow Jones Industrial Average futures turned negative before reversing course and turning positive. The yield on the 10-year Treasury fell to its lowest level since September 2017.

“We had expected a slowdown after several years of job gains holding around 200,000, but not this much of a slowdown,” said Beth Ann Bovino, U.S. chief economist for S&P Global Ratings. 

Broadly speaking, the report amounted to another dark spot amid fears of a larger sputtering in growth and perhaps a recession within the next year.


“While much of the attention from investors has been focused on trade disputes and the potential for a slowing economy, today’s disappointing employment report provides further evidence that the end of the business cycle is upon us and economic activity is slowing,” said Charlie Ripley, senior investment strategist for Allianz Investment Management.

The unemployment rate remained at 3.6%, in line with forecasts and the lowest since December 1969. A broader measure that encompasses discouraged workers and the underemployed holding part-time jobs for economic reasons, sometimes called the real unemployment rate, fell further, from 7.3% to 7.1%, its lowest reading since December 2000.

That decline came to a sharp drop of 299,000 in the part-time for economic reasons category.

Among individual groups, the rate for African Americans fell sharply, from 6.7% to 6.2%, while Asian Americans saw a gain from historically low levels, up from 2.2% to 2.5%.

Wage growth misses estimates

Wages gains also slowed a bit. Average hourly earnings year over year were up 3.1%, one-tenth of a point lower than expectations. The average work week held steady at 34.4 hours.

Job growth came primarily from professional and business services, which saw 33,000 new hires. Health care expanded by 16,000 while construction added 4,000 and manufacturing contributed 3,000. Retail lost 7,600 jobs.

Most other industries showed little change on the month.

“There were two big surprises,” Bovino said. “One, private payrolls were rather low at 90,000. But what was the biggest surprise was that census workers are not coming in.”

Overall, payroll gains have averaged 164,000 in 2019, a sharp decline from the 223,000 for all of 2018.

Friday’s Bureau of Labor Services reading added to worries that employment growth is slowing. A report Wednesday from ADP and Moody’s Analytics raised fears even more as it said private payrolls increased by just 27,000. The BLS showed private payrolls up 90,000, while government jobs fell by 15,000.

The labor force participation rate was unchanged at 62.8%, in line with expectations.

The report comes with the U.S. economy at a crossroads.

Investors have been worried about slowing growth amid an escalating trade war between the U.S. and some its biggest global partners, China and Mexico. Global growth is slowing as well, with the World Bank earlier this week revising its forecasts lower.

Federal Reserve officials have been watching the data closely. In recent days, comments from several central bank leaders seem to have opened the door for rate cuts, though the timing remains uncertain.

Markets are now pricing in a summer reduction, likely in July, followed by another cut in September or October followed by a third in early 2020.

Economic data points, though, have remained positive if slowing a bit. The Atlanta Fed expects second-quarter GDP to be up 1.5% after the 3.1% growth in the first quarter. 12:00 AM
Dow jumps 250 points after disappointing jobs data increases chances of Fed rate cut

Stocks jumped on Friday, building on strong weekly gains, as weak economic data increased the odds of easier monetary policy from the Federal Reserve.

The Dow Jones Industrial Average traded 255 points higher, led by gains in Microsoft and Apple. The S&P 500 climbed 0.9% as the tech sector outperformed. The Nasdaq Composite gained 1.4%.

The U.S. economy added 75,000 jobs in May, marking the second straight month of monthly jobs growth below 100,000. Economists polled by Dow Jones expected an increase of 180,000 jobs. Wage growth also slowed.

“The market’s got a conundrum here. That’s a bad report. Just on the report itself, I think people would want to sell the market. However, the fact that it really makes the case for a rate cut, I think is why you’re seeing the market hang in there,” said JJ Kinahan, chief market strategist at TD Ameritrade.

Market expectations for a Fed rate cut in June rose to 27.5% from 16.7% after the data release, according to the CME Group’s FedWatch tool. The market is also pricing in a 79% chance of lower Fed rates by July. 12:00 AM
Richard McClintock, a Latin professor at Hampden-Sydney College in Virginia, looked up one of the more obscure Latin words,

Shares of Beyond Meat surged 27% in morning trading Friday after analysts raised their price targets following the company’s first quarterly report since going public.

The company’s stock, which has a market value of $7.4 billion, is up more than 400% since it went public at the beginning of May.

Credit Suisse analyst Robert Moskow’s new price target of $125, up from a previous target of $70 per share, is the closest to the stock’s price of $126.30 following its latest surge. Beyond priced its initial public offering at $25 per share.

The company said Thursday that it expects annual revenue to exceed $210 million, more than doubling last year’s net sales, but Moskow’s estimates put 2019 sales at $224 million.

“Inbound interest from restaurant chains has increased following the tremendously positive publicity during the Beyond Meat IPO,” he wrote in a note.

Executives told analysts on the conference call that they only include post-trial distribution to restaurants in the company’s forecasts.

J.P. Morgan analyst Ken Goldman estimates that Tim Hortons, which is currently testing a breakfast sandwich made with the Beyond Sausage, could add nearly $23 million in revenue this year. Goldman raised his price target to $120 from $97.

“Importantly, when discussing guidance, CEO Ethan Brown said, ‘We’re being very conservative’ and let investors know that no foodservice customers are included in guidance until they are past the testing stage,” Goldman wrote.

Goldman Sachs analyst Adam Samuelson raised his price target to $76 from $67, and Jefferies analyst Kevin Grundy raised his price target to $105 per share from $85.

Beyond Meat reported first-quarter revenue of $40.2 million, up 215% from a year ago, and a net loss of 14 cents per share on a pro forma basis. 12:00 AM
NASA opening International Space Station to business, including private astronaut missions by 2020

National Aeronautics and Space Administration is opening the International Space Station (ISS) for more business, laying out its plan to do so at the Nasdaq stock exchange on Friday.

Companies will be allowed to bid for new activities on the ISS, as NASA unveiled a new directive to “enable commercial manufacturing and production and allow both NASA and private astronauts to conduct new commercial activities aboard the orbiting laboratory,” the agency said in a press release.

NASA is also opening up the ISS for “private astronaut missions of up to 30 days,” it said, “with the first mission as early as 2020.” As Boeing and SpaceX are developing capsules to carry humans to the ISS, the agency said the two companies will handle these private tourists and any services related to them. NASA will start with two private astronaut flights a year, with each trip lasting 30 days maximum each.

Each trip will likely cost over $50 million, with NASA getting $35,000 for each night a private astronaut spends on the International Space Station.

The commercialization of the ISS has long been considered a way to reduce NASA’s yearly costs for operating the station. Additionally, the ISS has been touted as a stepping stone to build an ecosystem of business in orbit around the Earth, so companies can manufacture, experiment, advertise and even host tourists.

Shortly after his appointment as NASA Administrator, Jim Bridenstine met with private companies about managing the space station. Although NASA has been increasing its reliance on private space companies, none of the companies working on low Earth orbit space habitats have expressed interest in taking over the ISS wholesale.

Boeing has been NASA’s primary contractor on the ISS ever since the aerospace giant was selected in 1993 to develop and build the floating lab. About a third of NASA’s more than $3 billion annual budget for the ISS is for operating costs, according to the Washington Post last year.

This story is developing. Please check back for updates. 12:00 AM