Employers add fewest jobs in eight months; unemployment jumps to 9.1 percent

June 3, 2011

Behind the hard numbers in Friday’s dismal report on the job market are scared small-business owners, slashed state budgets, dried-up federal stimulus funds and a lingering uncertainty that has taken hold from corporate boardrooms to factory floors around the country.

Employers added 54,000 jobs in May, the Labor Department said Friday, down from 232,000 in April. The unemployment rate rose to 9.1 percent from 9 percent. That deterioration in the labor market marks only the latest in a slew of recent signs that the economic recovery is losing momentum.

It is the second time that growth has stumbled; a similar scenario played out last summer, reflecting the long, uneven process of clawing out of a recession spurred by a financial crisis.

Employers from coast to coast describe a situation in which tepid economic growth alone isn’t enough to prompt them to add to their payrolls. Sales have been rising, but slowly and tenuously. Doubts about the future have continued to chip away at confidence and prevented many business people from taking the leap of faith required to expand and hire new workers.

“Everybody is so fearful right now because of the uncertainty about the future,” said Bill Hall, who owns five Dairy Queen franchises around Fort Worth. “It’s a problem that’s impacting all of us. That uncertainty and that fear is the number one reason you’re not seeing job growth. . . . Everybody is in a situation where they’re afraid to make a move. Unfortunately, that’s caused everything to come to a standstill.”

That standstill showed in the numbers released Friday, which revealed that the job market weakened across a wide range of industries in May. Manufacturers cut 5,000 jobs, partly as a result of disruptions from the earthquake in Japan. Retailers shed 8,500 jobs. The leisure and hospitality industry cut 6,000 jobs.

The largest job losses were in a public sector that is rapidly retrenching. Local governments have been cutting jobs in vast numbers — 28,000 in May — trying to eliminate their yawning budget gaps by dismissing public employees.

The public school district in Saginaw, Mich., for example, gave pink slips to 12 percent of its employees, including dozens of teachers, custodians and bus drivers. The reasons are familiar: Federal stimulus money is drying up; states are slashing their budgets, and cities and schools are following suit; and health care, fuel and other costs are rising.

But the district’s superintendent, Carlton Jenkins, sees grave repercussions that could extend beyond the immediate job losses in a community already battered by foreclosures and unemployment.

“This goes way beyond budget cuts,” Jenkins said. “When you start cutting into the potential for students to gain access to better lives, that’s real. These cuts are going to devastate our communities. . . . This is going to impact the health, the economic development of our community. This is going to impact a lot of things.”

In contrast with the previous three months, when the private sector was expanding its payrolls aggressively enough to maintain solid job growth despite the loss of government jobs, in May the private sector downshifted. Even as professional and business services and the health-care industry added thousands of jobs, gains in most other sectors slowed to a crawl or went backward.

Even businesses that have taken on new employees — the private sector has added jobs for 14 straight months — have done so with some trepidation.

Aziz Hashim, president of an Atlanta-based company that owns scores of Popeyes, Checkers and Domino’s Pizza franchises in Georgia, California, Arizona and Florida, said his firm added four new restaurants last year and is on pace for five this year. But he said a lack of clarity about government policy and doubt about the direction of the economy has held him back from more aggressive expansion.

“We have been expanding, but we could be expanding faster,” he said. “There’s no question that we could be doing more, but we have to be very careful because we can’t adequately project” what lies ahead.

In Fruitland, Md., Bennett Construction has added seven workers in the past five months amid a surge in business, bringing its total to 23 employees. But Janet Bennett, whose family runs the company, said hiring is an expensive and daunting undertaking.

“We’re thrilled to give people jobs . . . but it’s a hardship,” she said. “You try to keep your business going. You try to hire new people. But then you have to pay more unemployment taxes, you have to pay more workers’ compensation, you have to pay more in health insurances. . . . It just snowballs for the employer.”

Even then, Bennett said, there’s no guarantee that the firm won’t have layoffs down the road if business dries up.

“You just never know what it’s going to be like a year from now,” she said. “We’re not setting the world on fire by any stretch.”

Brady Dennis is a national reporter for The Washington Post, focusing on food and drug issues.
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