Payrolls fell by 49,000 after a 28,000 drop in April, the Labor Department said today in Washington. The jobless rate increased by half a point to 5.5 percent, higher than every forecast in a Bloomberg News survey, as an influx of teenagers into the workforce exceeded jobs available.
Employers are cutting back to protect profits as raw- material costs soar and sales slow. A weaker job market is another blow to Americans hit by falling home values, scarcer credit and higher fuel bills, adding to the risk that the longest consumer-spending expansion on record will come to an end.
Treasuries rose after the report, sending yields on benchmark 10-year notes down to 4 percent at 8:57 a.m. in New York, from 4.04 percent late yesterday. Futures on the Standard & Poor's 500 stock index dropped 0.6 percent to 1,396.30. The dollar weakened.
Revisions subtracted 15,000 from payroll figures previously reported for March and April.
Economists had projected payrolls would drop by 60,000 after a previously reported 20,000 decline the prior month, according to the median of 79 forecasts in a Bloomberg News survey. Estimates ranged from decreases of 150,000 to 10,000. The jobless rate was forecast to rise to 5.1 percent from 5 percent.
The unemployment rate, the highest since October 2004, reflected an expansion of the workforce, led by teenagers. The increase in the rate was the biggest since February 1986.
A loss of jobs is one of the criteria used by the National Bureau of Economic Research to determine when recessions begin and end. The group, the official arbiter in the U.S., defines contractions as a ``significant'' decrease in activity over a sustained period of time. In addition to payrolls, changes in sales, incomes, production and gross domestic product are also considered.
Payrolls shrank by 324,000 workers in the first five months of the year. In 2007, the economy generated 91,000 new jobs a month on average.
Factory payrolls fell 26,000 after declining 49,000 in April. Economists had forecast a drop of 40,000. The decrease included a drop of 7,500 computer and electronics manufacturing jobs. Auto factories added 4,400 workers.
General Motors Corp. has said 19,000 workers, or about 26 percent of its union workforce, accepted the latest offer to leave, and most of those will stop working by July 1. Ford Motor Co. will trim salaried-employee costs by 15 percent by eliminating contract workers and not filling open jobs.
The protracted housing slump and resulting collapse in subprime lending were also reflected in today's report. Payrolls at builders fell 34,000 after decreasing 52,000. Financial firms decreased payrolls by 1,000, after a gain of 1,000 the prior month.
Service industries, which include banks, insurance companies, restaurants and retailers, added 8,000 workers after increasing by 72,000 in April. Retail payrolls decreased by 27,100 after a drop of 38,700.
Government payrolls increased by 17,000 after a gain of 12,000, indicating the total decline in private payrolls was 66,000.
The number of Americans receiving jobless benefits surpassed 3.1 million in May for the first time in four years, indicating employees that are being let go are having a more difficult time finding new jobs.
Consumer confidence last month sank to the lowest level in more than 15 years as the employment outlook deteriorated, according to a report from the Conference Board, a New York research group.