American employers in May added the fewest workers in a year and the
unemployment rateunexpectedly increased as job-seekers re-entered the workforce, further evidence that the labor-market recovery is stalling.
Payrolls climbed by 69,000 last month, less than the most- pessimistic forecast in a Bloomberg News survey, after a revised 77,000 gain in April that was smaller than initially estimated, Labor Department figures showed today in
Washington. The median estimate called for a 150,000 May advance. The jobless rate rose to 8.2 percent from 8.1 percent, while hours worked declined.
Stocks and Treasury yields plunged as the figures showed a looming recession in the euro area and slower growth in
Chinaand Brazil are taking a toll on the U.S. Bigger job and wage gains are needed to jumpstart a self-sustaining increase in hiring and consumer spending.
“The labor market is clearly deteriorating,”
Hugh Johnson, chairman and chief investment officer at
Albany, New York-based Hugh Johnson Advisors LLC, whose payrolls projection of 75,000 was the closest to the May reading among economists surveyed by Bloomberg. “Confidence in the economy is declining. Businesses are extremely reluctant to add workers when there’s so much uncertainty.”
The Standard & Poor’s 500 Index slumped 1.5 percent to 1,291.34 at 9:41 a.m. in
New York. The yield on the benchmark 10-year Treasury note dropped to 1.5 percent, from 1.56 percent late yesterday, after reaching a record low of 1.4387 percent.
Economists’ Estimates
Estimates of the 87 economists surveyed ranged from increases of 75,000 to 195,000 after a previously reported 115,000 rise in April. Revisions subtracted a total of 49,000 jobs to payrolls in March and April.
The figures follow data earlier today showing the global economy is struggling as Europe’s sovereign-debt crisis roils financial markets.
A measure of manufacturing in the 17-nation euro fell to a three-year low, while measures of the industry in China,
India,
South Korea and
Taiwan also weakened. The Markit Economics final index of U.S. manufacturing decreased to 54 in May from 56 in April, the London-based group said today. A reading above 50 indicates expansion.
Republicans seized on the numbers to criticize President
Barack Obama’s economic policies five months before Americans head to the polls to either re-elect Obama or choose presumptive Republican nominee
Mitt Romney.
“Too many Americans remain out of work and because of the president’s policies, our nation’s small businesses remain hesitant to hire and reluctant to grow,” House Majority Leader
Eric Cantor, a Republican from Virginia, said in a statement.
Auto Bailouts
Obama supporters also expressed concern. “Absolutely nothing good to be said” about the data,
Steven Rattner, who helped lead the administration’s bailouts of General Motors Co. and Chrysler Group LLC, said in a message on Twitter.
The report shows the
Federal Reserve is making little progress toward its objective to bring the
unemployment rate to a range of 5.2 percent to 6 percent. Fed Chairman
Ben S. Bernankehas said a lack of progress toward that goal would lead the central bank to consider additional easing.
The unemployment rate was forecast to hold at 8.1 percent, according to the survey median. Estimates in the Bloomberg survey ranged from 8 percent to 8.2 percent. Unemployment has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948.
Participation Rate
The participation rate, which indicates the share of working-age people in the
labor force, rose to 63.8 percent from 63.6 percent.
Private payrolls, which exclude government agencies, rose 82,000 after a revised gain of 87,000. They were projected to rise by 164,000, the survey showed.
“The
U.S. economy is recovering but at a stubbornly slow pace,”
Carl Camden, president and chief financial officer at staffing provider Kelly Services Inc., said on a May 9 conference call. “Weakening European economies have shaken confidence here in the U.S. business, consumers and investors remain cautious.” Still, with demand increasing for skilled workers, “we remain optimistic about 2012,” he said.
Factory
employment increased by 12,000, less than the survey forecast of a 15,000 increase.
General Motors Co. is among companies boosting payrolls. The world’s biggest automaker said last month it will add 600 employees to a second shift at an assembly plant in Lansing, Michigan, according to the
Detroit News.
Service Employment
Employment at service-providers increased 84,000 in May. Construction companies cut 28,000 jobs, the most in two years, and retailers boosted payrolls by 2,300.
“I have been searching relentlessly and I can’t find anything,” said Dexter Favors, 57, of Atlanta. Favors has been out of work for three years, though his wife is employed. “It is kind of rough right now because she is pulling the load.”
Favors, who worked last as a grocery store department manager and is an Air Force veteran, said he has put out around 80 applications for work and continues to search.
Government payrolls declined by 13,000.
Average hourly earnings increased 0.1 percent, today’s report showed. Compared with May of last year, earnings climbed 1.7 percent, the smallest increase since December 2010.
The average work week for all workers fell to 34.4 hours from 34.5 hours.
Underemployment Rate
The so-called
underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 14.8 percent from 14.5 percent.
The report also showed an increase in long-term unemployed Americans. The number of people unemployed for 27 weeks or more rose as a percentage of all jobless, to 42.8 percent from 41.3 percent.
Faster economic growth would help lay the groundwork for more hiring. Gross domestic product climbed at a 1.9 percent annual rate from January through March, down from a 2.2 percent prior estimate, reflecting smaller gains in inventories and bigger government cutbacks, according to revised Commerce Department figures released yesterday. The report also showed corporate profits rose at the slowest pace in more than three years and smaller wage gains at the end of 2011.
The pace of growth has been “disappointing” and “the headwinds retarding recovery are well known,” Federal Reserve Bank of New York President William C. Dudley said this week. He reiterated that he expects growth of about 2.4 percent over the next four quarters and said
Europe’s sovereign debt crisis poses a downside risk to the outlook.
Today’s figures may put more pressure on the Fed to take further steps to boost the economy after their current maturity extension program, known as Operation Twist, expires at the end of June.
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