U.S. Employers Add 69,000 Jobs, Fewer Than Forecast
The American jobs engine sputtered in May as employers added the fewest workers in a year and the unemployment rate rose, dealing a blow to President Barack Obama’s re-election prospects and raising the odds the Federal Reserve will step in to boost growth.
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 projection called for a 150,000 May advance. The jobless rate rose to 8.2 percent from 8.1 percent.
“The picture is getting more worrisome,” said Bruce Kasman, chief economist for JPMorgan Chase & Co. in New York, which lowered its 2012 growth forecast to 2.1 percent from 2.3 percent after the jobs report. “The U.S. economy is going to be somewhat softer over the next couple of quarters.”
Stocks tumbled, erasing the 2012 advance in the Dow Jones Industrial Average, and Treasury yields fell as the data reinforced concern that global growth is heading for a third mid-year lull. Other reports today showed manufacturing output shrank in Europe and slowed in China, the world’s second-largest economy.
The Dow slumped 2.2 percent to 12,118.57 at the close of trading in New York. The yield on the benchmark 10-year Treasury note dropped to 1.46 percent, from 1.56 percent late yesterday, after sliding to a record 1.4387 percent.
Manufacturing in Asia
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.
Other U.S. data today pointed to bright spots for the economy as manufacturing maintained its expansion and consumers stepped up spending.
The Institute for Supply Management’s index of manufacturing eased to 53.5 in May, in line with the median estimate in a Bloomberg survey, from April’s 54.8. Orders climbed to the highest level since April 2011.
Household purchases increased 0.3 percent in April after a revised 0.2 percent rise the prior month, according to figures from the Commerce Department. The gain in spending matched the median forecast in a Bloomberg survey.
Estimates of the 87 economists surveyed on payrolls 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 unemployment rate was forecast to hold at 8.1 percent, according to the survey median. Unemployment has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948.
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. Among them is Dexter Favors, 57, an Air Force veteran who lives in Atlanta.
“I have been searching relentlessly, and I can’t find anything,” said Favors, who 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, said he has put out around 80 applications for work and continues to search.
Byron Wilson, 41, of Marietta, Georgia, lost his job as a sales manager almost two years ago. He said his $1,200 a month in unemployment benefits will run out in September.
1994 Honda Civic
Wilson, who has an 11-year-old son, said he drives a 1994 Honda Civic with more than 300,000 miles on it and has cut out purchases of clothing and “any entertainment.” He has been using the time he’s been out of work to go back to Georgia Perimeter College, where he is studying sports management.
Unemployment benefits have been “extremely important,” he said. “It is definitely a critical time for me.”
Mitt Romney, the presumptive Republican nominee in the November presidential election, seized on the jobs figures to attack Obama.
“It is now clear to everyone that President Obama’s policies have failed to achieve their goals and that the Obama economy is crushing America’s middle class,” Romney said in a statement.
The administration, seeking to blunt the political impact, highlighted private payroll gains over the past 27 months while promoting measures Obama has proposed to boost hiring.
“We’ve known all along that this is a fragile world economy, but we have been adding jobs,” Alan Krueger, chairman of the White House Council of Economic Advisers, said on Bloomberg Television today. “We’d like to see more job growth given the enormous hole that we face in terms of jobs in this country.”
Private payrolls, which exclude government agencies, rose 82,000 in May 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 executive 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.”
Factory employment increased by 12,000, less than the survey forecast of a 15,000 increase. Among companies boosting payrolls is General Motors Co., the world’s biggest automaker, which said last month it will add 600 employees to a second shift at an assembly plant in Lansing, Michigan, according to the Detroit News.
Construction companies cut 28,000 jobs, the most in two years, and retailers boosted payrolls by 2,300. Government payrolls declined by 13,000. Employment at service providers increased 84,000 in May.
Meaghan Flood, 22, just graduated from Middlebury College in Middlebury, Vermont as an English and Chinese double major. She will begin working for Portland, Maine-based The Beacon Group, a consulting company, on June 18.
“Every interview I went to, they told me how hard the job market still is,” she said. “Even the people who want to hire you were warning about the possibility that they wouldn’t be able to.”
Today’s report increases the odds that Fed policy makers led by Chairman Ben S. Bernanke will take further action to stimulate the world’s largest economy when they next meet on June 19-20. Operation Twist, a program to extend the maturities of bonds on the Fed’s balance sheet, expires this month.
“That would have the impact of helping to reduce longer- term interest rates without expanding our balance sheet,” Rosengren said yesterday.
“My feeling is that because the slowdown in the economy has been fairly rapid compared to what they expected, that they’ll go ahead and extend Operation Twist,” he said.
Income growth also slowed, today’s report showed. Americans’ average hourly earnings were 1.7 percent higher than a year earlier, the smallest 12-month change since December 2010. At the same time, they worked 34.4 hours a week on average, six minutes less than the month before.
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 participation rate, which indicates the share of working-age people in the labor force, rose to 63.8 percent from 63.6 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,” Fed 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.
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