U.S. employment growth stalled in May

Adding to the weakness in the payroll picture: job gains for both March and April were lowered. Employers actually added 126,000 new jobs in April, instead of the 138,000 previously reported. For March, employment grew by 175,000, rather than 200,000.

The report comes as President Bush is coping with low job-approval ratings. Trying to breath life into his economic agenda, Bush earlier this week tapped Wall Street veteran Henry Paulson, chief of Goldman Sachs, to be the next Treasury secretary.

Workers’ average hourly earnings stood at $16.62 in May, a small 0.1 percent increase from April. That was smaller than the 0.3 percent rise economists were expecting and marked a moderation from a sharp pickup in earnings registered in April.

Wage improvement is good for workers but a rapid, sustained acceleration can ignite inflation concerns.

To thwart inflation the Federal Reserve in May bumped up a key interest rate for the 16th time since June 2004, when the central bank embarked on its credit-tightening campaign. Economists said Friday’s report boosts the odds that the Fed will leave rates alone at its next meting, June 28-29. Others, however, still predict another rate increase will come at that time.

Economic growth in the April-to-June quarter is expected to moderate as rising borrowing costs, lofty energy prices and a slowdown in the housing market take their toll on consumers and, to a lesser extent, businesses.

Given Friday’s employment figures, economists were lowering second-quarter growth forecasts to around 2.5 percent. That would mark a deceleration from the brisk 5.3 percent pace logged in the first quarter of this year.

Oil prices, which hit a record high of more than $75 a barrel in late April, are now hovering above $71 a barrel. Gasoline prices have topped $3 a gallon in some areas.

Other economic barometers offered a mixed picture for May. Manufacturing activity lost a bit of momentum. Consumer confidence sagged. But many retailers reported better than expected sales, suggesting that most shoppers are still spending with some gusto despite high energy prices.

The report also showed the average time that the 7 million unemployed spent searching for work in May was 17.1 weeks. That was up from 16.8 weeks in April and was the highest since February.

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