The U.S. labor market stumbled 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 bid and raising the odds the Federal Reserve will take steps 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 yesterday in Washington. The median projection called for a 150,000 May advance. The jobless rate rose to 8.2 percent from 8.1 percent.
“This is a total disappointment all the way around,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “Once again the job market and the economy looked stronger at the start of the year and come March, April, May, it certainly got a lot of drag on its forward momentum.”
The Dow Jones Industrial Average wiped out its 2012 advance, the yield on the benchmark 10-year Treasury note fell below 1.50 percent for the first time and commodity prices slumped. The labor data reinforced concern that the global economy is heading for a third mid-year setback. Other reports showed manufacturing shrank in Europe and slowed in China.
Estimates of the 87 economists surveyed on May 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 Dow fell 2.2 percent to 12,118.57 at the close yesterday in New York. For the year, the index has dropped 0.8 percent.
The unemployment rate was forecast to hold at 8.1 percent, according to the survey median. The jobless rate has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948.
“Any time that unemployment goes up, that’s not a good thing for our business or probably any other retailer because people have less money to spend,” said Robert Niblock, chairman and chief executive officer of Lowe’s Cos., the second-largest U.S. home improvement retailer.
“From a macroeconomics and jobs standpoint, we are trying to be sufficiently cautious in our outlook,” Niblock told reporters yesterday after the company’s annual shareholders meeting in Charlotte, North Carolina.
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.
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 yesterday.
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’s “In the Loop” with Betty Liu yesterday. “We’d like to see more job growth given the enormous hole that we face in terms of jobs in this country.”
It’s especially troubling for Americans such as Byron Wilson, whose unemployment benefits have run out or are close to expiring. Wilson, 41, of Marietta, Georgia, said he lost his job as a sales manager almost two years ago, and that his $1,200 a month in unemployment benefits will run out in September.
Wilson, who has an 11-year-old son, said he has cut out purchases of clothing and 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.”
The employment 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. The Fed’s program to extend the maturity of bonds on its balance sheet, known as Operation Twist, is set to expire at the end of the month.
“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,” said John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina.
The participation rate, which indicates the share of working-age people in the labor force, rose to 63.8 percent from 63.6 percent, the Labor Department report showed.
Some companies that are hiring aren’t dipping into the pool of unemployed.
“Every person we’ve hired has been gainfully employed somewhere else,” said Jeff White, chief executive officer of timeRAZOR Inc., a tech startup that uses mobile applications to inform users about local events.
The Leesburg, Virginia-based firm has 15 full-time employees and is in the process of hiring three more.
Factory employment increased by 12,000, less than the survey forecast of a 15,000 increase, yesterday’s Labor Department report showed.
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. Government payrolls declined by 13,000.
Americans’ average hourly earnings were 1.7 percent higher than a year earlier, the smallest 12-month gain 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.
Some bright spots in yesterday’s data came by way of monthly reports on U.S. factories and consumer 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. Readings greater than 50 signal expansion. 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.