Weak job growth puts brakes on steady recovery
Saturday, June 5, 2010
Job creation by businesses came almost to a halt in May, the government said Friday, raising new doubts about the strength of economic growth in the months ahead and sending the stock market to one of its steepest losses of the year.
The U.S. economy has been expanding for nearly a year. But the Labor Department report called into question a virtuous cycle that seemed to be taking hold in recent months as businesses hired to meet heightened demand for their goods and services and the improved job market led consumers to buy more stuff. Surprisingly, private employers added only 41,000 jobs last month -- less than one fifth as many as in April.
Overall, more jobs were added in May than in any other month in the past decade, and the unemployment rate fell to 9.7 percent, from 9.9 percent in April. But the high total job growth was driven by temporary hiring for the once-a-decade census, and the lower unemployment rate was driven by people dropping out of the labor force, perhaps out of frustration.
President Obama and his aides have grown increasingly comfortable pointing to -- and taking credit for -- a rising economic tide, and repeated that optimistic message Friday, citing strong overall job growth numbers. But if the recovery falters, Obama could come across as tone-deaf or worse by the midterm elections.
Economists almost universally described the report as disappointing. In nearly every major industry, job growth was weaker in May than in April or negative. The figures come on top of recent news -- the debt crisis in Europe, renewed volatility in financial markets and the Gulf of Mexico oil spill -- that has forecasters wary that the U.S. economy can maintain steady growth through the second half of the year.
"You're just not getting the kind of job growth people associate with a robust recovery," said John Silvia, chief economist at Wells Fargo. "The problem is employers are dealing with a lot of uncertainty on a number of different fronts."
In remarks at a trucking firm in Hyattsville, Obama cited the May numbers as the fifth consecutive month of job growth. "While we recognize that our recovery is still in its early stages and that there are going to be ups and downs in the months ahead," he said, "this report is a sign that our economy is getting stronger by the day."
Obama's aides acknowledged that the slower private-sector job growth was not what they were hoping for, but they noted that economic data can be volatile and one month's results do not signify a trend.
"These things move around a lot," said Christina Romer, chairman of the White House Council of Economic Advisers, in an interview. "You can't put too much weight on any one month's number."
Private economists generally agree, and noted that when the April job growth is averaged with the May number, the result is a solid but unspectacular pace of growth.
Financial markets were shaken by the jobs report, however. The stock market ended the day down 3.4 percent, as measured by the Standard & Poor's 500-stock index, and global investors fled all assets perceived as risky. The Dow Jones industrial average was down 323.31 points, or 3.2 percent, at 9,931.97. The euro fell to a four-year low against the dollar, and European markets tumbled after a Hungarian government official reportedly spoke about the possibility the nation might default on its debt. Money gushed into U.S. Treasury bonds, meanwhile, driving the rate the government must pay to borrow money for 10 years down to 3.2 percent.
The Friday report revived the possibility of a jobless recovery. The pace of job creation in May excluding the census was so slow it was even below the amount needed to keep up with growth in the labor force -- for instance new immigrants and graduates -- meaning the unemployment rate would never come down.