WASHINGTON — The U.S. economy suddenly looks a lot weaker.
U.S. employers created only 69,000 jobs in May, the fewest in a year, and the unemployment rate ticked up.
The dismal jobs data will fan fears that the economy is sputtering. It also puts President Barack Obama on the defensive five months before his re-election bid. And it could lead the Federal Reserve to take further steps to help the economy.
The Labor Department also said Friday that the economy created far fewer jobs in the previous two months than first thought. It revised those figures down to show 49,000 fewer jobs created. The unemployment rate rose to 8.2 percent from 8.1 percent in April, the first increase in 11 months.
Job creation is the fuel for the nation’s economic growth. When more people have jobs, more consumers have money to spend – and consumer spending drives about 70 of the economy.
Here’s what The Associated Press’ reporters are finding:
What can be done to energize U.S. hiring?
Sung Won Sohn, an economics professor at California State University, said Congress and the Obama administration must work immediately to address the “fiscal cliff” looming at year’s end. That’s when the economy will be hit with higher taxes and across-the-board government spending unless Democrats and Republicans forge some compromise.
Uncertainty over what will be done about the fiscal cliff will likely hang over the U.S. economy for months.
“Businesses have pulled in their horns, given the growing amount of uncertainty,” Sohn said.
He said Federal Reserve Chairman Ben Bernanke could also start discussing another round of Fed bond buying to try to further lower long-term interest rates.
Sohn noted that more bond buying remains unlikely given how low rates are already. Still, he said, “just the fact that Bernanke is talking about more Fed bond buying would be important. What we need is a psychological lift.”
_ Martin Crutsinger, AP Economics Writer
DUELING POLITICAL VIEWS
White House economist Alan Krueger said that while the latest jobs report illustrated the need for faster growth, the administration welcomes any increase in jobs.
“We are on a better path then we had been before the president came into office,” he said.
Obama’s Republican challenger, Mitt Romney countered: “Today’s weak jobs report is devastating news for American workers and American families. …It is now clear to everyone that President Obama’s policies have failed to achieve their goals and that the Obama economy is crushing America’s middle class.”
_ Darlene Superville, Associated Press Writer
GOVERNMENT ISN’T HELPING
Government jobs cuts are worsening the jobs picture. The federal government shed 5,000 jobs in May, state governments 5,000 and local governments cut 3,000.
Overall, governments have cut jobs in 10 of the past 12 months.
Tax collections by state and local governments have been rising since mid-2009. Yet the belt-tightening continues. From January through March, government cuts reduced U.S. economic growth by 0.78 percent point to an annual pace of just 1.9 percent.
“Typically, the government offers a base level of support” when the economy is weak, says Scott Brown, chief economist at Raymond James Associates.
“In this case, the government is actually contributing to the weakness of the recovery. … You’re talking about teachers getting laid off. Government worker have families. They have mortgages. They spent their paychecks.”
_ Paul Wiseman, AP Economics Writer
CONSIDER THE `EMPLOYMENT RATE’
To assess the job market, most people look at the unemployment rate. But it can be misleading. The rate can fall, for example, even if hiring is weak.
This can happen when many people stop looking for work and are no longer counted as unemployed. The rate can also rise even when jobs are created, if more people start looking. The number of unemployed often rises. That’s what happened in May.
Then there’s the “employment rate.” It measures the percentage of adults who do have jobs. And it’s painting a more sobering picture.
Consider: The unemployment rate has dropped almost a full percentage point from August, from 9.1 percent to 8.2 percent. That might suggest the job market is steadily strengthening. Yet the employment rate has improved only slightly in that time, from 58.3 percent to 58.6 percent. That’s lower than when the recession ended, when it was 59.4 percent.
So why the difference? The economy has added jobs since August – but only about enough to keep up with population growth and prevent the unemployment rate from rising much.
_ Christopher S. Rugaber, AP Economics Writer
EUROPE STILL WORSE
As bad as the May employment numbers were, Americans can take solace from one thing: It’s a lot worse in Europe.
Unemployment in the 17 countries that use the euro currency hit 11 percent in April, the highest since the single currency was introduced in 1999, the European Union’s Eurostat office reported Friday.
“Europe would gladly trade places with the U.S.,” says Josh Feinman, global chief economist of DB Advisors.
But Europe’s problems are likely to pinch America too, by denting U.S. exports to Europe and rattling financial markets. And should the U.S. economy, the largest in the world, weaken further, that would further damage economies in Europe and Asia.
_ Paul Wiseman, AP Economics Writer
COAL WORKERS SQUEEZED
A warm winter that cut electricity demand and decade-low natural gas prices have led to tough times for the coal industry. Demand for coal in the U.S. is projected to drop to the lowest level since 1992 this year.
In response, coal companies are cutting back, especially in West Virginia and Kentucky, where relatively expensive coal is produced. Patriot Coal, based in St. Louis, has laid off 1,000 workers this year.
Alpha Natural Resources, based in Bristol, Va., announced in February it would idle four mines and lay off 320 workers. Earlier this month, it announced it would idle another mine and slow production at one more, cutting 133 more jobs.
_ Jonathan Fahey, AP Energy Writer
The job market remains tough even for the very educated or very experienced. Erica Johnson, 33, calls herself a “couch-surfing Ph.D.” because she’s been sleeping on sofas in the homes of friends and relatives in Lexington, Ky. Armed with a doctorate in education policy, she’d like to work as a college administrator.
But most management jobs she’s pursued require more experience. Yet she’s considered over-qualified for lower-level jobs.
“There aren’t a lot of mid-level openings,” Johnson said, after many states have cut education budgets.
Phil Allen, 48, a PR professional in suburban Chicago, says he’s had 70 job interviews in the past year. He gave a 20-minute presentation as part of an all-day interview for one opening this spring and left thinking, “There’s no way I’m not going to get this job.”
“But I didn’t get it,” he said. “That’s kind of a crushing thing.”
_ Christopher S. Rugaber, AP Economics Writer
Nearly three years into the recovery, hiring remains weak by every historical standard.
Consider what happened when companies slashed jobs in the 1981-82 recession. In September 1982, layoffs ran at an annual rate topping 4 percent. But the economy rebounded explosively. And job growth followed. By February 1984, 15 months after the recession had ended, hiring was occurring at a 6.5 percent annual pace.
During the Great Recession, job cuts were even steeper. They occurred at a 6 percent to 7 percent annual rate in the winter of 2008-09. Yet since the recession officially ended in June 2009, job gains have been fitful. Hiring has only recently topped 2 percent of total payrolls – just one-third the pace after the 1981-82 recession.
What’s going on this time?
Mainly, the economy is too weak to drive more job growth. Consumers are still cautious about spending. And the housing sector is still weak. Both are weighing on the economy more than in previous recoveries.
_ Christopher S. Rugaber, AP Economics Writer
@ justinwolfers :
For perspective, compare this month’s job growth (+69k) with average under George W. Bush (+11k).
From Felix Salmon, the finance blogger at Reuters:
To spell this out: high corporate profits and low levels of job growth are two sides of the same coin. If things were working properly right now, companies would take their excess revenues and use them to hire more people. Instead, they’re basically just letting those excess revenues sit on their balance sheets as cash because they’re scared to invest in themselves. It’s frankly pathetic.
The solution to this problem is nothing complex — the arbitrage is sitting there in the first chart, plain for all to see. The government can borrow at 1.45%: it should do so, in vast quantities, and invest that money back into the economy itself. Take a few hundred billion dollars and use it to fix our broken infrastructure, to re-hire all those laid-off teachers and firefighters, to provide some kind of safety net for the millions of Americans who have been out of work for more than a year.
Stephen Bronars, senior economist at Welch Consulting, writes the following in a sobering blog post:
According to the latest figures from the Bureau of Labor Statistics, more and more young adults are taking part-time rather than full-time jobs. While the number of young adults age 20-24 has increased by 6.78% over the past four years, full-time employment has plunged by 17.1%. In contrast, part-time employment for young adults has increased by 37.2% over the past four years. Put somewhat differently, in May of 2008 71.7% of employed young adults had full-time jobs. In just four years the fraction of employed young adults with full-time jobs is 60.4%.
He speculates this may be partly due to students delaying their graduation because of the weak job market.
@ fivethirtyeight :
This jobs report is no big deal. Every economy has a few bad decades.
AFL-CIO President Richard Trumka, the head of the largest U.S. labor federation, called Friday’s jobs report “alarming and unacceptable,” and he faulted GOP lawmakers in Congress for the tepid job growth. From his statement:
Most frustrating is the fact that it is not the means for recovery that lack, but rather the will. For purely political and cynical reasons, Republicans in Congress have blocked President Obama’s efforts to maintain momentum for growth, whether it’s the American Jobs Act or routine highway infrastructure investments. Moreover, under the leadership of Mitt Romney, Paul Ryan and John Boehner, Republicans are also looking to cut back on policies that provide relief for the millions of working families worrying about how to pay the bills and how to make ends meet.
From Derek Thompson, senior editor at The Atlantic:
@ DKThomp :
Big picture #3: Since Dec 2009 public payrolls have fallen 510,000, offsetting about 1 out of every 8 new jobs added in the private sector
Since Thompson’s analysis does not account for the fiscal multiplier, government job cuts probably have hurt private job growth even more than he is saying. That is because unemployed schoolteachers and firemen have less money to spend, which translates into less income for private-sector workers, who then spend less. Austerity leads to a self-reinforcing cycle of unemployment, lower income, less consumer spending, and more unemployment.
@ AnnieLowrey :
Maybe the farm payrolls report is really good this month?
@ DKThomp :
Big picture 2: Since December 2009 manufacturing has accounted for 12% of private sector job gains.
@ DKThomp :
Big picture: The participation rate is slightly higher than it was at the start of the year, and the unemployment rate is slightly lower.
@ JHWeissmann :
@BCAppelbaum @justinwolfers At least you got the fun of a bubble. Class of ’08, not so much.
@ ryanavent :
I want a move that implies more Fed action until output gap is much smaller.
From Barclays Capital economist Peter Newland:
The details were broadly encouraging. First, the decline in the headline is no surprise, given the strong pace of manufacturing output growth in Q1, and remains consistent with continued recovery in activity. Second, that the drop in May was driven largely by the production component (down to 55.6 from 61.0) suggests to us that producers are working to reduce inventory levels rather than responding to signs of weaker demand (the inventory index fell to 46.0 from 48.5, although this is a measure of raw materials rather than work in progress). Indeed, the new orders index bucked the trend by increasing to 60.1 from 58.2, a thirteen-month high (Figure 1). The employment index also remained at fairly robust levels, down slightly, to 56.9 from 57.3. All in all, given the backdrop of sharply weaker PMI indices in Europe and China and coming on the heels of a very soft payrolls number, this report offers signs that the recovery has not been entirely derailed.
U.S. Labor Secretary Hilda Solis tried to put a rosy sheen on the disappointing jobs numbers in a statement issued Friday, glossing over May’s anemic growth in favor of a longer-term view:
Our labor market continues to recover. We continue to add jobs to an economy that was once bleeding 800,000 a month under the previous administration. Over the last 27 months, we have added more than 4 million private sector jobs. And for each of the past five months, we have created an average of 169,000 jobs. Additionally, the number of people who have been unemployed for six months or more has decreased by 800,000 over the last year.
Across the board, industry sectors are growing. This month we saw strong growth in health care, transportation and warehousing, and wholesale trade. Also, growth in manufacturing continues to trend up, with nearly 500,000 jobs added over the last 28 months — the strongest growth in manufacturing since April 1995.
There’s no gilding the rotting dead rodent that is the U.S. job numbers report. But as any teenager knows, rationalization is a key coping strategy. Got bad grades? Tell mom how lucky she is that she didn’t give birth to Tommy down the block, who failed every subject.
Spain, in the job news context, is our Tommy. Pushed along by a banking crisis sparked by a massive real estate bubble (sound familiar?) the country is in absolute free-fall. Unemployment recently hit a mind-blowing 24.3 percent, according to Bloomberg News, far and above the European Union average of 11 percent. More than 5 million Spaniards are unemployed.
Feel any better?
@ BetseyStevenson :
We lost 28K construction jobs in May. Imagine if we were actually doing all the infrastructure investment this country needs.
@ McDonaldsCorp :
@arthurdelaneyhp While we can’t eliminate unemployment worldwide, we do what we can to create jobs in the communities we do business.
@ McDonaldsCorp :
@arthurdelaneyhp Cheer up Arthur, eat some fries smile! By the way, did you know that 1.8M people worldwide work for brand McDonald’s?
Arthur’s original tweet: “people w/ jobs RT @McDonaldsCorp: It’s Friday!!!!! Who else is looking forward to the weekend?”
Here’s some tips for older workers, both employed and unemployed, from HuffPost 50:
Amid Tepid Growth, Tips To Find A Job When You Are Over 50
Retirement Homes: 30 Options From $114,500 In Up-And-Coming Retirement Cities
–Laura Rowley and Bonnie Kavoussi
@ BCAppelbaum :
For the record, I’m not sad because of one month’s jobs report. I’m sad because the economy has sucked for my entire adult life.
From Barclays Capital economist Cooper Howes:
Construction spending now stands 6.8% higher than in April 2011…. In all, this report shows a pattern similar to the one seen in March and remains consistent with our view that residential investment will provide a positive contribution to GDP growth in 2012.
And from Ian Shepherdson, chief U.S. economist at High Frequency Economics:
April construction spending rose 0.3%, a tenth less than expected, but note that the level of spending in March was revised up by a hefty 1.2%, so overall this report is much better than it looks or was expected. The details show housing continuing to lead the way, with new-build up 2.1%, getting the second quarter off to a very strong start. Even if May and June are flat – they won’t be – the quarter will be up at an annualized 18% rate…. Construction will add to Q2 GDP growth.
Michelle Meyer, senior U.S. economist at Bank of America, writes that labor force growth this month will not last:
The labor force jumped 642,000 after two months of sharp declines; this may be partly explained by students entering the labor force. Looking past the monthly noise, we believe the labor force participation rate will head lower as long as job growth remains sluggish.
From a research note by Michelle Meyer, senior U.S. economist at Bank of America:
This is the recovery of fits and starts, and we believe we are entering a slow patch in the second half of the year. This report is not sufficient to prompt Fed action in June, but it makes August QE increasingly likely.
From Paul Ashworth, chief U.S. economist at Capital Economics:
The modest decline in the US ISM manufacturing index, to 53.5 in May from 54.8 the month before, was probably a lot better than most people had feared after the weak payrolls data and the sharp declines in the manufacturing PMIs for Europe and China. The key new orders index even strengthened to a 13-month high of 60.1, from 58.2. The decline in the headline index was driven by a drop back in the production index to 55.6, from 61.0, and a slide in the employment index to 56.9, from 57.3. Nevertheless, all these indices remained well above the 50 mark that is supposed to separate expansion from contraction…. The upshot is that while the employment data have taken a turn for the worse, the output and expenditure data appear to be holding up much better, at least for now.
There is one potential bright spot in the dim economic news being released today: data hinting that the housing market may be recovering. Construction spending rose 0.3 percent in April, according to new government data. Construction spending during the first four months of this year was 1.6 percent higher than it was during the same period last year.
The ISM manufacturing index plunged 0.7 percent in May to 53.5. Ryan Sweet, economist at Moody’s Analytics, writes in a research note that “the decline was larger than we anticipated and snaps a streak of two consecutive monthly gains.”
“The May ISM survey confirms the economy is in the midst of a soft patch but its not near recessionary levels,” he adds.
The average workweek for American workers fell 0.1 hours to 34.4 hours, according to the Labor Department. That is a bad sign, since it signals weaker employer demand for labor.
Average hourly earnings have risen just 1.7 percent over the past year, according to Labor Department data analyzed by Paul Ashworth, chief U.S. economist at Capital Economics, in a research note. Average hourly earnings now are $23.41, according to the Labor Department.
It’s all downers today, seems like. The AP is reporting that oil prices fell $2.34 to $84.19 per barrel Friday in New York. The nearly 3 percent drop extends a month of sharp losses due to concerns about future demand if economic growth weakens, AP reports.
From the statement on the jobs report by White House economist Alan B. Krueger:
In the American Jobs Act and in the State of the Union Address, the President put forward a number of proposals to create jobs and strengthen the economy, including proposals that would put teachers back in the classroom and cops on the beat, and put our nation’s construction workers back on the job rebuilding our nation’s infrastructure. The President has also proposed a “To-Do List” of actions that Congress should take to create jobs and help restore middle-class security.
Proposals, still not approved by Congress or signed into law.
“Obama’s failed policies have made high unemployment and a weak economy the sad new normal for families and small businesses,” said House Speaker John Boehner in a statement. (Politico)
Over on the WSJ live blog, Jonathan Cheng exhorts readers to look at gold prices. The safe haven, which hasn’t been acting like a safe haven lately, shot up 1.5 percent today to $1,587 an ounce.