US Creates 69,000 New Jobs, Unemployment Rate 8.2%
The American jobs engine hit stall speed in May, with the economy adding just 69,000 new jobs while the unemployment rate climbed to 8.2 percent.
As another summertime swoon looms, the Bureau of Labor Statistics reported that job creation missed economist estimates for 158,000 new positions and the jobless rate rose for the first time in nearly a year.
Labor force participation remains near 30-year lows though incrementally better than last month, rising to 63.8 percent.
The unemployment rate that counts discouraged workers rose as well, swelling to 14.8 percent form 14.5 percent in April.
Long-term unemployment also took a sharp upturn, with the number of those out of work for 27 weeks or more jumping from 5.1 million to 5.4 million. The average duration of unemployment moved from 39.1 weeks to 39.7 weeks.
"It's painfully obvious the economic recovery in the U.S. isn't just slowing down, it's pulling up the emergency brake. And, lack of job creation isn't the only critical concern. Wages/Income is sharply lower," said Todd Schoenberger, managing principal The BlackBay Group in New York.
"For those lucky enough to have a job, their spending power is sliding when accounting for inflation. The markets will respond negatively to this report," he added.
Markets reacted immediately to the numbers.
In May, stocks suffered through their worst month in two years, and the job-creation figures only added to the gloom.
Stock were sharply lower open for Wall Street, while investors continued to pour into bonds, sending the 10-year Treasury note yield tumbling to near 1.47 percent. Crude oil fell more than 4 percent, below $83 a barrel, while gold and other metals jumped.
The bulk of the employment gains came from the service sector, which added 84,000 jobs, while manufacturing grew 12,000. Government shaved 13,000 jobs, including 5,000 at the federal level. Private payrolls rose 82,000.
"Government is the lender and spender of last resort in this economy," said Doug Roberts, managing principal for Channel Capital Research. "There is no priming the pump, and as government stimulus wears off the economy starts to slow down again."
Construction took the biggest hit, dropping by 28,000 for the month.
Most economists attributed the reversal in fortune to a historically mild winter that saw job creation at a clip of 250,000 per month. In addition to the loss of construction jobs, the hospitality industry, which had been at the forefront of economic growth, lost 9,000 positions and temp hiring gained only 9,000.
"There was clear evidence of a weather payback," said Michelle Meyer, economist at Bank of America Merrill Lynch. "All three of these sectors had seen solid job growth during the winter."
The weak showing immediately sparked market discussion about whether the Federal Reserve will step in with another round of quantitative easing after its Operation Twist program concludes at the end of June.
"With markets in a highly volatile state of mind a weak May employment report was the best possible outcome because it would offer investors some assurance that the Fed will likely move to boost the US economy with a further round of quantitative easing in some form or another," said Andrew Wilkinson, chief economic strategist at Miller Tabak.
"An in-line to above expectation reading might be quickly consigned to the trash basket with investors quickly returning to focus on shaky markets and headline risk from Europe and now Asia," he added.
The political ramifications of the weak report could be substantial.
With Mitt Romney clinching the Republican presidential nomination this week, he can train his sights on President Obama, who will have to convince the electorate that a wobbly economy is actually on the right track.
In its official statement, the White House blamed the jobs weakness on the "Great Recession" it said Obama inherited when he took office in 2009, and said the economy continues to add jobs.
"The economy is growing but it is not growing fast enough," said Alan B. Krueger, chairman of the Council of Economic Advisers. "There is much more work that remains to be done to repair the damage caused by the financial crisis and deep recession that began at the end of 2007."
For his part, Romney called the jobs report "devastating news" that comes on the heels of a downward revision of gross domestic product growth to 1.9 percent for the first quarter.
"Slowing GDP growth, plunging consumer confidence, an increase in unemployment claims, and now another dismal jobs report all stand as a harsh indictment of the President’s handling of the economy," the Republican said in a statement.
The report comes a month after the government reported that just 115,000 new jobs were added in April, a number that helped contribute to a general malaise about economic growth.
Even that number was worse than thought: The BLS revised the April number down to 77,000.
With worries swelling over the state of the global economy, another weak employment report in the U.S. adds to fears that a sharp slowdown is on the way.
The average workweek, a closely watched economic metric, slipped by 0.1 hour to 34.4 hours. The manufacturing workweek dropped by 0.3 hour to 40.5 hours, and factory overtime fell by 0.1 hour to 3.2 hours.