Posted on June 2, 2012
Filed Under Economics | Comments Off on Payrolls Rise by Just 69,000; Jobless Rate Ticks Up to 8.2%
Feeble hiring by U.S. employers in May roiled markets and dimmed the already-cloudy outlook for an economy that appears to be following Europe and Asia into a slowdown.
The U.S. economy added just 69,000 jobs in May, less than expected, and the unemployment rate rose to 8.2%.
Employers added a seasonally adjusted 69,000 jobs last month, the smallest increase in a year, and estimates for the two previous months were lowered. The politically salient unemployment rate inched up to 8.2% from 8.1% in April, and the report immediately became a flash point in a presidential race focused on the candidates’ job-creating credentials. President Barack Obama and Republican nominee Mitt Romney sparred over the numbers in back-to-back appearances where each made his case to voters.
Stock markets tumbled on the report. The Dow Jones Industrial Average notched its worst showing of the year Friday, falling 274.88 points, or 2.2%, to 12118.57. Investors snapped up U.S. Treasury bonds instead, pushing down yields to the lowest level on record yet again. The yield on the benchmark 10-year Treasury note finished at 1.467%. Bond prices and yields move in opposite directions.
Friday’s jobs numbers caught the White House and the Obama campaign by surprise. Polls show the economy consistently remains voters’ top concern before the November election.
Mr. Romney seized on the report as evidence Mr. Obama has mismanaged the economy. “The president’s policies and his handling of the economy has been dealt a harsh indictment this morning,” Mr. Romney said in an interview with CNBC.
Mr. Obama, speaking later at an event in Minnesota, called employment growth too slow but blamed Republicans in Congress for blocking policies he said would create jobs, such as tax credits for small businesses and measures to help homeowners refinance mortgages. The economy “is growing again but it’s not growing as fast as we want,” he said at a Honeywell International Inc. facility in Golden Valley, Minn. “We are still fighting our way back from the worst economic crisis since the Great Depression.”
Mr. Obama’s campaign has sought to use Mr. Romney’s career at private-equity firm Bain Capital to paint him as a coldhearted capitalist who cut jobs, while Mr. Romney has highlighted that business experience to bolster his credentials as a job creator.
Jobs were only one of the worrisome economic indicators released Friday. A separate report showed U.S. manufacturing growth cooled in May, with sharp drops in both production and exports.
Another report showed consumer spending rose in April—but outpaced incomes—suggesting many consumers are strapped for cash.
The economy is resilient in some areas. Inflation remains tame and auto sales continue to gain, while falling energy prices are helping ease strains on consumers. But the larger picture is of an economy that seemed to be gaining traction earlier in the year only to start wobbling as the weather got warmer—a familiar pattern in recent years.
The dismal employment report is sure to sharpen a debate at the Federal Reserve about whether to do more to spur economic growth. Some Fed officials who are less worried about inflation had already started lobbying for additional action before Friday’s numbers. But the central bank’s most influential decision makers have been hesitant to signal any more moves. The report will add heft to those advocating action and put pressure on officials to act, though it isn’t clear this will result in a broader consensus for action right away.
Some Fed officials might want to see more data before making what would surely be a controversial decision to do more to spur growth.
That six-month average is a fine data point, but shows the three bad months came after the three good months. Job growth is slowing — sharply — no matter how you average out the numbers. Get more real-time analysis.
The jobs report came a day after the government downgraded its estimate of economic growth in the first quarter to a 1.9% annual rate, down from 3% in the fourth quarter of 2011. Some analysts said they planned to lower expectations for growth in the current quarter.
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