Today's eagerly anticipated jobs report from the Department of Labor fell far short of expectations, once again raising serious questions about the sustainability of the recovery that began in the third quarter of 2009. The total job increase was 431,000, but private-sector hiring hit a disappointing 41,000 jobs, far less than the 180,000 median prediction of 82 experts surveyed by Bloomberg. Some of the experts had predicted as many as 750,000 jobs would be added.
"It’s going to be a long haul," Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado, said before the report. "We really aren’t adding many jobs. We’ve lost some momentum in the economy and final sales clearly aren’t enough to generate job growth."
Meanwhile, the unemployment rate fell from 9.9 percent to 9.7 percent. That drop was in great part because 286,000 unemployed reentrants left the labor force. An alternative measure, U6, which includes part-time workers and people who have become so discouraged in their job search that they have given up looking, fell to 16.6 percent.
The hiring of 411,000 temporary Census workers in May meant that last month was the best job performance since March 2000. But that's an illusion because those Census jobs will start disappearing this month and be gone by summer's end. It's the underlying trend of the private hiring that matters, and that showed a sharp drop from April's and March's revised numbers. It takes around 125,000 new jobs each month just to match population growth.
The number of long-term unemployed – those out of work for 27 weeks or more - rose to 6.8 million, or 46 percent of all unemployed Americans. That remains, as it has for many months, a post-1930s record.
Given that stimulus spending will fade sharply in the third and fourth quarter, it's now up to the private sector to sustain growth in employment. Experts, including many Fed bank branch presidents, have been saying for months that a tepid economy was in the works.
One very bad bit of employment news from earlier in the week is that young people looking for summer jobs will find the going tough:
The unemployment rate for the 16-to-24 age group reached a record 19.6 percent in April, double the national average. For those job seekers, said Heidi Shierholz, an economist at the Economic Policy Institute, "This is the worst year, definitely since the early ’80s recession and very likely since the Great Depression."
How today's news will affect consumer and investor confidence remains to be seen. But it's unlikely to be good. We're like the passengers on an airliner that plunged 15,000 feet and is now regaining altitude slowly. Every vibration or strange new engine noise is viewed with worry and suspicion.
One thing we can expect is that the Republicans will take glee in the devastating weakness of today's report. They're always on the lookout for whatever they can use against the Democrats, even when it means continued misery for millions of Americans. And what do they offer an alternative to current policies? Deficit cuts, more shredding of the safety net, lower taxes for their gated-community pals, obstruction on extending unemployment benefits. Unfortunately, many Democrats have joined the chorus for deficit cutting and knocking big chunks out of measures designed to help the 15 million Americans who are officially out of work.
Earlier in the week, other economic numbers were generally positive, though some indicated slowing. The Institute for Supply Management reported the 10th consecutive month of expansion, with growth in 16 of 18 categories, but the overall pace of growth slowed. The employment index component of the manufacturing report was up again. The non-manufacturing report held steady, indicating expansion, but at a rate lower than expected. Its employment index increased for the first time in 28 months. Construction spending was up over March in April, although still 10.5 percent below the same spending in April 2009. Retail activity for May as measured by chain-store sales was soft after a tepid April. Personal bankruptcies were way up over May 2009.
The jobs report also noted:
• Manufacturing employment rose 29,000
• Construction employment declined by 35,000
• Temporary help services added 31,000 jobs
• The average workweek for production and non-supervisory workers rose to 34.2 hours.
• Average hourly earnings increased by 7 cents in May.
• The civilian labor force participation rate fell to 65 percent in May.
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SilverOz has a diary on this subject here