The Labor Department reported that the economy created just 38,000 new jobs in May, the weakest job growth since September of 2010, when it lost 52,000 jobs. In addition, the jobs numbers for the prior two months were revised down by 59,000, bringing the average for the last three months to just 116,000.

The household survey showed a drop of 0.3 percentage points in the unemployment rate, but this is not especially good news. The decline was almost entirely due to people leaving the labor force. The employment-to-population ratio [EPOP] was unchanged at 59.7 percent, 0.2 percentage points below the the peak for the recovery. In addition, the number of people involuntarily working part-time jumped by 468,000.

While the strike at Verizon lowered the jobs numbers in the establishment survey by roughly 35,000, the picture would be little changed if these numbers were added in. The weakness in the establishment survey was widely spread across sectors. Only the health care sector showed much growth, adding 45,700 jobs. Furthermore, adding 35,000 jobs to the May figure barely changes the 3-month average. This jobs report will make it very difficult for the Federal Reserve Board to raise interest rates this month.

Read the full analysis of May's Jobs Report here.