Employers added only 54,000 jobs in May, down from a revised 232,000 in April, the Labor Department said Friday morning. The unemployment rate rose to 9.1 percent last month, from 9 percent.
The grim numbers are the latest in a string of disappointing economic readings. Manufacturing is slowing, and consumers are pulling back on spending, according to other data released this week. All point to an economic expansion that is now too sluggish to bring down unemployment to a sustainable level. The economy needs to add around 125,000 new jobs each month just to keep pace with an ever-growing population.
As the Labor Department’s news hit the markets, stocks opened down, with the Standard & Poor’s 500 index down 1 percent at 9:35 a.m. and the Dow Jones Industrial Average also down about 1 percent. The stock market has been relatively stable as amid new signs of economic weakness, but the market for Treasury bonds has reacted more dramatically. The U.S. government could borrow money for a decade for only 2.96 percent Friday, down from 3.03 percent, reflecting expectations that the Federal Reserve will keep interest rates low for a longer time to help boost growth.
Responding to the unemployment report, House Speaker John Boehner (R-Ohio) said Friday morning, “One look at the jobs report should be enough to show that the White House should get serious about cutting spending.”
House Majority Leader Eric Cantor (R-Va.) called the report “a warning we need to do better,” adding, “We need to get America back to work.”
There were some bright spots in the May data, but only a few. The unemployment rate rose primarily because more people--272,000 of them--joined the labor force and began looking for a job. Average weekly pay increased 0.3 percent, as both the length of the workweek and hourly pay rose. And a broader measure of unemployment that captures people who have given up looking for work out of frustration and part-time workers who want a full-time position dipped to 15.8 percent, from 15.9 percent.
More broadly, the strong gains of the previous three months had seemed too-good-to-be-true, not matching up with the more modest improvement in the labor market seen in other reports. The weak numbers in May even that out. The United States has now added an average of 157,000 jobs a month in 2011, which is about what would be expected given overall economic growth.
Still, there is little question that the economic recovery has lost juice. Several leading economists have cut back their forecasts for 2011 growth in the last two weeks, and the poor jobs numbers add to the concern.
The unemployment figures will heighten pressure on the Federal Reserve and other economic policymakers to find new ways to inject some vigor the economy. The Fed has kept its target interest rate near zero, but it has few tools left to help in any significant way besides announcing another round of large-scale purchases of Treasury bonds. Their latest round of quantitative easing, the purchase of $600 billion in bonds launched in November, is set to expire this month.
Fed leaders have not indicated that they plan more quantitative easing, but if the economic data steadily weakens as summer gets underway, they may have to reconsider.
The Obama administration and Congress are also in a pickle, now focused on reducing the budget deficit rather than coming up with new ways to help the economy expand. The usual methods--tax cuts and new spending--would only raise the deficit.
Post a Comment