Following a 123,000 job gain in April, the economy generated just 38,000 jobs in May. We expected job growth to slow, but not that much. This weak payroll report may well deter the Fed from raising rates this summer. The weakness in job growth in May was across many industries, and especially noticeable was the large drop (21,000) in the temporary help industry.

Given the drop in corporate profits and investment in recent quarters, it was surprising that job growth held up so well until now. But even though the days of 200,000 plus average monthly job growth are probably over in this expansion, we don't expect job growth to remain below 100,000.

Another surprise was the drop in the unemployment rate to 4.7 percent, below estimates of the natural rate of unemployment. Faster wage growth is likely to partly offset the slowdown in hiring, and maintain moderate growth in household income and consumption for the rest of 2016.