The nation's job market took a sharp turn for the worse last month as employers abruptly curbed their hiring and the unemployment rate rose — grim evidence that the economic recovery is faltering.
The new Labor Department report, which showed the unemployment rate edging upward to 9.1 percent, was bad news for millions of Americans seeking work and for the hundreds of thousands of newly minted college graduates whose hopeful prospects are now increasingly uncertain.
But beyond those looking for work, the downturn in hiring signaled continuing troubles for the rest of the nation: A weaker economy — and the increased risk of sliding into a new recession — reduces the likelihood that personal income will rise or that families will better themselves financially in other ways.
In recent days, an array of data has pointed to a slowdown in manufacturing and consumer spending, as well as persistent weakness in the depressed housing market.
Employers in May added a mere 54,000 to their payrolls, less than half what's needed just to keep pace with growth in the working-age population. The size of the downturn was all the more unsettling because it came after three straight months of solid payroll increases that averaged 220,000 a month and had led many analysts to believe the job market was finally turning the corner.
It was the second month in a row that the jobless rate climbed, though: After steadily declining during the winter, the unemployment figure rose from 9 percent in April and 8.8 percent in March.
"No one knows on one month's data ... but this one is a real sign of fragility and danger," said Ron Blackwell, chief economist at the AFL-CIO. "Basically, this is what economic stagnation feels like."
Wall Street analysts were braced for a weak jobs report, but the payroll numbers came in even smaller than the lowered expectations from analysts, who on average predicted gains of 160,000 jobs in May. Stocks have broadly retreated in recent days with the spate of bad news.
The Dow Jones industrial average, which hit a three-year high above 12,800 on April 29, lost another 97 points, to close at 12,151 on Friday.
Further declines in stocks could sap consumer spending even more, at a time many families are already feeling poorer, with home prices still declining in many places and wages showing little growth. Hourly earnings for all employees on private-sector payrolls averaged $22.98 last month. That was up 41 cents from a year ago — or 1.8 percent, which is below the current pace of inflation.
The overall labor force — those working or looking for jobs — grew by 272,000 to 153.7 million in May. The more people enter or re-enter the labor force, the stronger the pressure for unemployment to rise unless job growth keeps pace. And in the coming months, the labor market will be flooded with young graduates from high school and colleges. An estimated 1.7 million students were projected to earn bachelor's degrees in the 2010-11 academic year, with most of them graduating in May and June.
Prospects had improved for this year's college graduates. For the class of 2011, 41 percent of those who applied for jobs before graduating had at least one employment offer, up from 31 percent for the class of 2010, according to a survey by the National Association of Colleges and Employers.
Edwin Koc, the association's research director, said computer science majors had the highest job-offer rate this year — 57 percent — followed by graduates with degrees in accounting, economics and engineering.
"Right now, things are looking pretty good," said Ben Meredith, 23, a computer science major at Dakota State University in South Dakota, who has a full-time summer job and expects to have a permanent position in hand by the time he graduates in December.
This year's crop of student in humanities, however, did no better or in some cases worse than their peers a year ago. In the current class, only 23 percent of English majors who applied for work had an offer before graduation. And of education majors, only 19 percent had a job awaiting them. Nor do future teachers' near-term prospects look good, not with local governments continuing to reel from budget cuts.
"Looking ahead we see some risk that total payrolls will continue to disappoint during the summer as state and local government layoffs of teachers continue to feed into the data as the school year ends," economists at UBS Investment Research said Friday in a research note.
The number of officially unemployed, meanwhile, held steady at about 13.9 million last month. But the share of those who have been without work for six months or more, known as the long-term unemployed, jumped to 45.1 percent, near a record high.
In addition, the ranks of part-time workers who said they couldn't find full-time jobs stood at 8.5 million last month. And there were 822,000 discouraged workers who have stopped looking for jobs because they saw little hope of getting hired. Taken together, the level of unemployed and underemployed was 15.8 percent in May, compared with 15.9 percent in the prior month.
Forecasters at Moody's Analytics, a leading research firm, now see employers adding fewer than 200,000 jobs a month for the rest of this year, a pace that would barely make a dent in the high unemployment rate.
One big concern is the reluctance of small businesses to hire. In past recoveries, they accounted for an outsized share of job growth, but this time around they haven't done nearly as well as large companies and are remaining on the sidelines.
"With 1 in 4 owners reporting weak sales as their No. 1 business problem, there is little need to add employees, especially with the uncertainty about future labor costs arising from new regulation and legislation," said William Dunkelberg, chief economist for the National Federation of Independent Business, in a report outlining the group's latest survey. In it, he said, fewer firms in May expected to add workers in the next three months than they did in April, while more companies planned to reduce staff.
"And if Congress doesn't deal effectively with the trillion-dollar deficits, that is worrisome as well," he said.
The AFL-CIO's Blackwell and some other analysts and Democratic leaders in Washington immediately called for more government action to spur job growth, such as stronger support for infrastructure building and further monetary stimulus from the Federal Reserve. The Fed's $600 billion bond-buying program, aimed at holding down long-term interest rates, is set to expire at the end of this month.
But Friday's report seemed only to harden partisan positions over budget deficits and other economic policies related to recovery from the deep recession, which officially came to an end two years ago this month.
Republican leaders again blamed the weak economy and scant job growth on what they said were flawed Obama administration policies, insisting Friday that instead of more government spending, tax cuts and reduced government regulations were the way to go.
"One look at the jobs report should be enough to show the White House it's time to get serious about cutting spending and dealing with our ailing economy," said House Speaker John Boehner, R-Ohio, at a GOP news conference Friday morning.
President Barack Obama, in his customary practice of visiting a business on the day of the monthly jobs report, on Friday toured the Chrysler auto plant in Toledo, Ohio. The federal government's bailout of Chrysler and General Motors during the recession was highly controversial, but the domestic auto industry has since regained its footing — something Obama highlighted as he defended his economic policies and pointed to brighter days ahead.
Nonetheless, Friday's jobs report provided no boost for Obama. Not only did payrolls come in well short of expectations, but employment in the U.S. car-manufacturing industry also fell by 3,400 last month.
Manufacturing, which had been leading the recovery, on the whole lost 5,000 jobs in May, reversing months of healthy gains that, until last month, totaled 243,000 since December 2009.
Apart from health care and some professional services — notably accounting and computer systems — there was little or no net job gain in other service-producing sectors. And local governments continued to be a drag on the economy, shedding 28,000 jobs, most of them at schools.
There were indications that some of the weakness in the hiring was due to temporary factors.
Supply-chain disruptions stemming from Japan's earthquake and tsunami in March most likely contributed to the loss in auto-production employment last month. Higher fuel prices, although easing a bit in recent weeks, also may have played a role in restraining hiring by retailers and restaurants, among other businesses.
The jump in energy prices has weighed on consumer spending and also cut into business profits. Concerns about Europe's debt crisis and the U.S. budget problems and the looming deadline to raise the debt ceiling have further eroded confidence.
U.S. Labor Secretary Hilda Solis said the budget uncertainties — and perceptions that Washington isn't doing enough to help the economy — probably took some steam out of private job growth, which has totaled 2.1 million in the past 15 months.
"I am concerned about it," she said of the May jobs report in an interview, "but I don't think it's going to determine where we go. ... There's a lot of good things that have happened."
Source: McClatchy-Tribune Information Services.