Yellen calls May jobs report ‘disappointing,’ signals Fed will wait on rate hike

WASHINGTON – Federal Reserve Chair Janet Yellen on Monday called the surprisingly weak May jobs report “disappointing” and signaled that central bank policymakers would wait at least a month on another interest rate hike.

In her last public comments before next week’s Fed meeting, Yellen told the World Affairs Council of Philadelphia that “recent signs of a slowdown in job creation bear close watching.”

In her prepared remarks, Yellen said she expected the economy to continue improving and that “further gradual increases in the federal funds rate will probably be appropriate.”

But Yellen notably didn’t say she expected such a rate increase “in the coming months” as she did in comments on May 27. Those remarks came before Friday’s Labor Department report showing the economy added just 38,000 net new jobs last month.

May’s job creation was the worst since 2010 and shocked analysts who had been anticipating the economy added about 158,000 net new positions.

The 38,000 figure was pushed down by a Verizon strike last month that has ended. But even taking those temporarily unemployed workers into account, the job creation was anemic.

Earlier Monday, another Fed policymaker also called Mays jobs report “disappointing” and indicated he wanted to hold off on raising the rate at the June 14-15 meeting.

Eric Rosengren, president of the Federal Reserve Bank of Boston and a voting member of the central bank’s policymaking committee, said economic data recently have been “choppy” and that “it will be important to see whether the weakness in this report is an anomaly or reflects a broader slowing in labor markets.”

Also on Monday, Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, said central bank policymakers should wait until at least July to enact a rate hike.

“I don’t personally see a lot of cost to being patient to the July meeting at least,” Lockhart, who does not have a vote this year on monetary policy, told Bloomberg Television. “I think we can be watchful and see how things develop over the next few weeks.”

In addition to determining if May’s jobs report was an anomaly, waiting would allow Fed officials to see the results of a British vote on leaving the European Union. The June 23 referendum could roil financial markets if voters opt to pull out of the EU.

In the days before the jobs report, Yellen and other Fed policymakers had indicated they could inch up their benchmark short-term interest rate as soon as this month.

Because of those statements, a widely watched gauge by the CME Goup futures exchange showed investors put the odds of a June rate hike at about 21 percent before the jobs report was released Friday.

The odds dropped after the report and were down to 5.6 percent on Monday. The odds of a rate hike at the Fed’s July meeting were 35.3 percent.