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Political Economy
Posted at 02:15 PM ET, 06/03/2011

After weak jobs report, economists and Capitol Hill react

The May jobs report confirmed what other recent economic indicators had suggested: The economic recovery is losing steam.

While Capitol Hill took the data as an opportunity to propose political agendas, economists used them as a way to evaluate what’s weighing on our economy and what it will take to bolster it.

Here’s a roundup of reactions to the unemployment report from Washington and beyond.

Rep. Eric Cantor (R-Va.) said in a statement that the numbers show a need to rethink our national economic policy:

“Today’s disappointing jobs report shows that our economy needs an injection of growth-oriented policies to ensure that businesses can innovate, expand and begin hiring again.”

Another GOP congressman, Rep. Michael Grimm of New York, also saw the data as evidence that a change of course is needed if the U.S. economy is to be boosted:

“This dismal news is a red flag that President Obama’s spending-driven policies are simply not working.  The snail’s pace of economic growth is not creating jobs and Americans are suffering.”

Speaker of the House John A. Boehner used the unemployment report as a springboard to criticize the White House’s policies.

Meanwhile, Senate Majority Leader Harry Reid (D-Nev.) touted his party’s sense of urgency in dealing with joblessness:

“Creating jobs has been Democrats’ top priority since day one, and I am encouraged that the private sector is continuing to grow and add jobs. Unfortunately, Republicans have been distracted, choosing instead to focus on their plan to end Medicare in order to pay for more tax breaks for millionaires.”

Rep. Chris Van Hollen of Maryland tried to find a bright spot in what many considered a discouraging report:

“Today’s jobs numbers, while not as robust as we had hoped, still represent important progress in our effort to rebuild the economy. The private sector had its 15th straight month of job creation in May, fueled by small businesses that are the backbone of our recovery.”  

Michael Gapen, Barclays Research:

“Altogether, this is a very weak jobs report. Real consumer spending got off to a weak start in April, and we had been looking for some improvement in May and June as the rate of headline inflation eases, but the soft auto sales in May (in part due to supply chain disruptions from Japan) suggest that consumption for the quarter will be more muted than expected. Ongoing softness in real consumption may be part of the explanation behind weaker services payroll growth. In addition, the weak May ISM Manufacturing report suggests that production is slowing abruptly, not only because of the consumption slowdown and supply chain disruptions but also because of a slowdown in export growth (which may be related to the effect of the surge in energy prices on demand elsewhere)…[T]he weakening in private sector job growth hints that the private sector may be turning a bit more cautious than we had thought.”

John Ryding and Conrad DeQuadros, RDQ Economics:

“There is now little doubt that economic growth hit a major headwind in May.  We had hung our colors to the masts of ISM and employment growth when we downplayed the slowdown in GDP in the first quarter.  However, both of these indicators are now signaling growth around 2½ percent in our judgment relative to our forecast of 3 percent - 3½ percent growth this year.  We do not think the economy is slouching toward a double-dip but we do believe that we have underestimated the near-term impact of the surge in energy and commodity prices (thanks, in part, to QE2) and the supply-chain disruptions from Japan.  The policy consequences are significant, although we do not see much chance of QE3.”

 Ian Shepherdson, High Frequency Economics:

“The 0.3 percent rise in hourly earnings followed a mere 0.1 percent net gain in Mar/Apr so the incipient upward trend in the y/y rate, visible in previous data, has now gone. Wage growth is flatlining.

“Overall, this is horrible, and if we thought it would continue for much more than another month or two we would be seriously worried. But we think it is largely a reaction — an overreaction we would say — to the rise in oil prices, and a very real hit to autos and tech from the Japan earthquake. But oil prices have now reversed more than half their gain since Feb, and consumers have not rolled over. The market reaction to these data is understandable, but that does not make it sustainable.”

Capital Economics:

 “We probably will see growth rebound in the second half of the year, as commodity prices drop back and any Japan-related disruptions unwind. For that reason we don't expect the Fed to act immediately.

“Nevertheless, the extent of this slowdown is becoming a huge concern, particularly with a potentially big fiscal consolidation on the way and we wouldn't rule out a QE3 either later this year or in early 2012.”

Stephen Stanley, Pierpoint Securities:

“Without a doubt, the May employment report was alarmingly weak. … After three straight robust payroll readings, is May a statistical hiccup, a temporary lull due to fleeting drags (gasoline price surge and Japan supply chain disruptions), or the beginning of another sustained pause in activity? ... My read of the anecdotal information is that the economy has substantial underlying resilience and can quickly recover, but consider me worried.”

By and  |  02:15 PM ET, 06/03/2011

 
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