Employment growth slows sharply in May

May employment sees a drastic slow down and the unemployment rate rose to 9.1 percent which continues to raise concerns that the economy is stuck in a painfully slow growth period.

On Friday June 3, 2011, 10:01 am EDT
By Lucia Mutikani
Reuters
Yahoo! Finance

WASHINGTON (Reuters) - Employers hired far fewer workers than expected in May and the jobless rate rose to 9.1 percent, raising concerns the economy might be stuck in a painful slow-growth mode.

Nonfarm payrolls increased 54,000 last month, the weakest reading since September, the Labor Department said on Friday. Private employment rose just 83,000, the least since last June, while government payrolls dropped 29,000.

Economists had expected payrolls to rise 150,000 and private hiring to increase 175,000. The government revised employment figures for March and April to show 39,000 fewer jobs created than previously estimated.

The job creation slowdown confirmed the economic weakness already flagged by other data from consumer spending to manufacturing, and it stoked fears the economy could be facing a more troubling stretch of weakness than had been thought.

"There are plenty of reasons to expect the third quarter will be better. But the question is now becoming how much better?," said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts.

Economists had pinned the economy's sluggishness largely on high energy prices, supply chain disruptions stemming from Japan's earthquake and tornadoes and flooding in U.S. Midwest and South. The department said it found "no clear impact" from weather on the jobs figures.

The employment report provides one of the best early reads on the health of the U.S. economy and it sets the tone for global financial markets.

U.S. stocks opened lower, while Treasury debt prices added to earlier gains and interest rate futures rose, signaling that traders believe mounting signs of economic weakness will lead the Federal Reserve to maintain an ultra-easy monetary policy.

The dollar fell against the yen and Swiss franc.

The sharp slowdown in job creation is troubling news for President Barack Obama, whose chances of re-election next year could hinge on the health of the economy.

RECESSION BOUND?

Economists said the report did not suggest the economy was heading into recession, but they said job growth could prove frustratingly slow.

"It is likely that this will be a soft patch in the coming months but overall it will probably be a soft patch rather than a double-dip recession or something worse," said Sean Incremona an economist at 4CAST in New York.

The data lent more fuel to talk about the need for the Fed to extend its asset purchasing program when it expires this month, but officials at the central bank have set a high bar for any further easing of monetary policy.

With the Obama administration and lawmakers discussing how best to trim the U.S. budget gap, the economy could be left to its own devices.

"The government changed our flat tire in 2008 and now we're driving around without a spare," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago.

High gasoline costs hurt consumer spending in the first quarter, restricting economic growth to a 1.8 percent annual pace after expanding at a 3.1 percent rate in the October-December period.

The economy has regained only a fraction of the more than 8 million jobs lost during the recession. Economists say payrolls growth above 300,000 a month is needed to make significant progress in shrinking the pool of 13.9 million unemployed Americans.

The rise in the unemployment rate from 9.0 percent in April reflected discouraged workers who had been inspired by the pick-up in hiring in April re-entering the labor market.

"There is so much slack in the labor market it's going to take a long time to get the unemployment rate down to between 6 and 7 percent. That's going to take years," said Stephen Bronars, a senior economist at Welch Consulting in Washington.

BROAD-BASED WEAKNESS

The employment report showed weakness across the board, with the private services sector adding 80,000 jobs last month after increasing payrolls by 213,000 in April.

Within the private services sector, leisure and hospitality fell, showing no boost from McDonald's recruitment of about 50,000 new staff in April, which was after the survey period for that month's payrolls. Spring is traditionally a strong hiring period for McDonald's.

Retail employment, which recorded its largest increase in 10 years in April, fell 8,500 last month. Manufacturing payrolls growth contracted 5,000 last month, the first decline since October, while construction employment rose 2,000.

The report showed the average work week steady at 34.4 hours and few signs of wage inflation, with average hourly earnings rising 6 cents.

(Additional reporting by Chris Reese in New York; Editing by Andrea Ricci)

To see original article CLICK HERE

Follow Us

Share Page

Login

Get access to the latest trading information, tools to help your investing, and much more!

Login   Sign Up

Search

Weekly Charts

Current Spot Prices

Gold$1289.61
Silver$19.47
Platinum$1426.00

Special Offers

 
 
© 2012 Swiss America Trading Corp. All Rights Reserved.   |   Privacy Policy   |   Site Map   |   Contact Us   |   Mobile Version
SWISS AMERICA and Logo are trademarks of Swiss America Trading Corp.
Where did you hear about us?
Roger HedgecockRay Lucia
Pat BooneMichael Savage
Bill CunninghamOther
iHeart Radio/Rush Limbaugh
×