NEW YORK (Reuters) - The United States may have hit a bump on the road to economic recovery, according to data released on Wednesday, with half a million private sector jobs lost in May and mortgage applications falling last week in the face of rising interest rates.
The reports illustrate the policy dilemma of the Federal Reserve, which has committed trillions of dollars to keep market interest rates low, only to watch them shoot higher in recent weeks.
One ray of hope, though, came from a report showing planned layoffs at U.S. firms fell for a fourth consecutive month in May, reaching the lowest level in eight months, suggesting the pace of future job cuts could slow.
But other data showed the service sector, which accounts for about 80 percent of economic activity, contracted for the eighth straight month in May, even though the rate of deterioration slowed.
"It kind of fits with all the other news we're getting: things are less bad but they're not yet growing," said Jonathan Basile, economist at Credit Suisse in New York.
"It's encouraging to see this stabilization process start to take hold, but at the same time the weakness does persist. These are still indications that we're not totally out of the woods yet."
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended May 29 decreased 16.2 percent to 658.7.
In the labor market, U.S. companies axed 532,000 jobs last month, more than economists had expected, according to ADP Employer Services.
Huge job losses are unlikely to lend support to the housing market or to an economy that has been overwhelmingly driven by consumer spending in recent years.
Worse yet, April's ADP figures were revised to show more job cuts than previously estimated, meaning May's job losses were smaller, but highlighting the ongoing deterioration in an economy that may have difficulty living up to expectations that it will resume economic growth in the second half of the year.
The bolded sections are those that were largely ignored by other media outlets. They preferred to report them as "better than expected". Hmm!
