Bull Bear Report Jun 03 2011

Finance Sector Adds Jobs in May, But Don't Get Too Excited

By julie steinberg

The financial activities sector saw a slight gain of 3,000 jobs last month, according to the May Employment Situation Report from the Bureau of Labor Statistics.

The sector has been gaining jobs since February, but the unemployment rate for the industry increased to 6.8% in May from 6.7% in April due to 12,000 more people joining the finance labor force.

The financial activities sector spans finance and insurance, commercial banking, security, commodities, insurance, funds and real estate.

Finance and insurance gained 1,600 jobs, while real estate, rental and leasing added 1,200. Credit and related activities lost 2,700 and rental leasing lost 1,900.

While the sector has added jobs every month since February, the industry "isn't out of the woods just yet," said Nariman Behravesh, chief economist at IHS Global Insight. "The sector is bounding around. We're in sort of a holding pattern. It's moving sideways."

There's uncertainty on the regulatory side and a weak demand for loans, he said, so because activity levels are fairly weak, he doesn't expect a huge surge in job creation. "It's clear that there's no well-defined trend at this point," he added.

With regards to the broader economy, only 83,000 private sector jobs were added in May, a significant departure from analyst expectations of 160,000. The overall unemployment rate rose to 9.1% from 9% in April.

"We're still seeing positive job gain, but clearly we're slowing down," Behravesh said. "The economy has decelerated quite a bit more than people were expecting a month ago."

Still, Behravesh is confident that growth will pick up in the second half the year, after the headwinds that have hit the economy -- like the ramifications from the Japanese crisis and high oil prices -- have dissipated. He expects to see better numbers by autumn, including in financial services.

Write to Julie Steinberg

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