US economy added 69K jobs in May --fewest in a year -- and unemployment rate rose to 8 point 2 percent
Friday, June 01, 2012
US economy added 69,000 jobs in May, fewest in a year;
unemployment rate rose to 8.2 percent
By: Associated Press, June 1, 2012
WASHINGTON - The U.S. economy suddenly looks a lot weaker.
Only 69,000 jobs were added in May, the fewest in a year, and
the unemployment rate rose from 8.1 percent to 8.2 percent.
The dismal jobs data will heighten fears that the economy is
sputtering. It also puts President Barack Obama on the defensive
five months before his re-election bid.
The Labor Department also said Friday that the economy added far
fewer jobs in the previous two months than first thought - 11,000
fewer in March and 38,000 fewer in April. And the increase in
unemployment was the first in 11 months.
Job creation is the fuel for the nation's economic growth. When
more people have jobs, more consumers have money to spend - and
consumer spending drives about 70 of the economy.
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Here's what The Associated Press' reporters are finding:
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WHY ONE EMPLOYER ISN'T HIRING
When Michael Eberstadt opened his New York City soul food
restaurant in 2007, he had a staff of about 25.
"That was right before the world ended," said Eberstadt, owner
of Rack & Soul, referring to the recession that began in
December that year. He's since shrunk his staff to about 15.
"Hiring is really a function of demand," he said.
"Unfortunately, if the demand isn't there, then you don't need to
hire."
Eberstadt said his restaurant was "hit hard and never really
recovered" from the recession. Last year, the top 500 restaurant
chains reported sales growth of just 3.5 percent, according to the
food industry researcher Technomic Inc.
Still, Eberstadt is relieved he hasn't had to lay anybody off
recently. His payroll has held steady for the past year.
- Candice Choi, AP Business Writer
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SEEKING SOLUTIONS
What can be done to energize U.S. hiring?
Sung Won Sohn, an economics professor at California State
University, said Congress and the Obama administration must work
immediately to address the "fiscal cliff" looming at year's end.
That's when consumers and businesses will be hit with higher taxes
and across-the-board government spending cuts unless Democrats and
Republicans forge some compromise.
Uncertainty over what will be done about the fiscal cliff will
likely hang over the U.S. economy for months.
"Businesses have pulled in their horns, given the growing amount
of uncertainty," Sohn said.
He said Federal Reserve Chairman Ben Bernanke could also start
discussing another round of Fed bond buying to try to further lower
long-term interest rates.
Sohn noted that more bond buying remains unlikely given how low
rates are already. Still, he said, "just the fact that Bernanke is
talking about more Fed bond buying would be important. What we need
is a psychological lift."
- Martin Crutsinger, AP Economics Writer
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PAIN ON WALL STREET
Stocks sank after the release of the jobs report. The Dow Jones
industrial average dropped more than 200 points, erasing what was
left of its gain for the year and putting the index on track for
its worst one-day drop in more than six months.
Economic data from Europe and Asia also came in weak, and
traders sold all types of risky investments and stampeded toward
the safety of U.S. government bonds. Bond prices rose sharply. And
the yield on the 10-year U.S. Treasury note touched 1.44 percent,
the lowest on record.
- Daniel Wagner, AP Business Writer
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BACK IN THE HUNT: OLDER WORKERS
Last month, 642,000 people began looking for work. And nearly
half were 55 or older.
Many have had no choice. Household wealth has shrunk as home
equity and stocks prices have declined or languished. And many
older people are helping struggling adult children.
Sara Rix, a policy analyst at the AARP's Public Policy
Institute, suggested that the decline in unemployment in previous
months lifted people's hopes about their job prospects. That's why
many started looking for work again.
- Christopher S. Rugaber, AP Economics Writer
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A SOBERING TREND
That more people are looking for work should be good news. It
suggests that Americans are increasingly optimistic about their job
prospects.
But analysts cautioned that May's influx was a small one that
doesn't alter the broader trend. Heidi Shierholz, an economist at
the liberal Economic Policy Institute, estimates that sluggish
hiring has discouraged 3.6 million people from looking for work
since the recession began in December 2007.
Consider the labor force participation rate. It measures the
proportion of people who are working or looking for work. It rose
last month to 63.8 percent. That's slightly better than April's
63.6 percent - the lowest in more than 30 years.
Yet it's still far below the 65.7 percent rate from June 2009,
the final month of the recession.
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DUELING POLITICAL VIEWS
Obama said the jobs report shows the U.S. economy is not
creating jobs "as fast as we want" but that the economy will
improve.
"We will come back stronger," Obama said. "We do have better
days ahead."
His Republican challenger, Mitt Romney, countered: "Today's weak
jobs report is devastating news for American workers and American
families. ...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."
- Jim Kuhnhenn, White House Correspondent
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GOVERNMENT ISN'T HELPING
Government jobs cuts are worsening the employment picture. The
federal government shed 5,000 jobs in May. State governments cut
5,000 and local governments 3,000.
Overall, governments have cut jobs in 10 of the past 12
months.
Tax collections by state and local governments have been rising
since mid-2009. Yet governments have steadily reduced spending.
From January through March, government cuts reduced U.S. economic
growth by 0.78 percent point to an annual pace of just 1.9
percent.
- Paul Wiseman, AP Economics Writer
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BIG CUTS IN CONSTRUCTION
Some major industries cut jobs sharply in May.
Construction firms cut 28,000 jobs. That was the sharpest such
drop in two years.
Governments shed 13,000. A category of employers called "leisure
and hospitality" cut nearly 9,000 positions, mostly because of jobs
lost at amusement parks, museums and casinos.
Professional and business service firms, which include
accountants, engineers and lawyers as well as temps and clerical
staffers, dropped 1,000.
On a hopeful note, manufacturers added 12,000 jobs.
Transportation and warehousing companies created nearly 36,000. And
46,000 jobs were added in education and health care. Hotels and
restaurants added roughly 9,000 jobs.
- Christopher S. Rugaber, AP Economics Writer
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CONSIDER THE EMPLOYMENT RATE
To assess the job market, most people look at the unemployment
rate. But it can be misleading. The rate can fall, for example,
even if hiring is weak.
This can happen when many people stop looking for work and are
no longer counted as unemployed.
The rate can also rise even when jobs are created, if more
people start looking. The number of unemployed often rises. That's
what happened in May.
Then there's the "employment rate." It measures the percentage
of adults who do have jobs. And it's painting a more sobering
picture.
Consider: The unemployment rate has dropped almost a full
percentage point from August, from 9.1 percent to 8.2 percent. That
might suggest the job market is steadily strengthening.
Yet the employment rate has improved only slightly in that time,
from 58.3 percent to 58.6 percent. That's lower than when the
recession ended, when it was 59.4 percent.
So why the disparity?
The economy has added jobs since August - but only about enough
to keep up with population growth and prevent the unemployment rate
from heading up.
- Christopher S. Rugaber, AP Economics Writer
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EUROPE STILL WORSE
As bad as the May employment numbers were, it's a lot worse in
Europe.
Unemployment in the 17 countries that use the euro currency hit
11 percent in April, the highest since the single currency was
introduced in 1999, the European Union's Eurostat office reported
Friday.
"Europe would gladly trade places with the U.S.," says Josh
Feinman, global chief economist of DB Advisors.
But Europe's problems are likely to pinch America too, by
denting U.S. exports to Europe and rattling financial markets. And
should the U.S. economy, the largest in the world, weaken further,
that would further damage economies in Europe and Asia.
- Paul Wiseman, AP Economics Writer
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COUCH-SURFING
The job market remains tough even for the educated or
experienced. Erica Johnson, 33, calls herself a "couch-surfing
Ph.D." because she's been sleeping on sofas in the homes of friends
and relatives in Lexington, Ky. Armed with a doctorate in education
policy, she'd like to work as a college administrator.
But most management jobs she's pursued require more experience.
Yet she's considered overqualified for lower-level jobs.
"There aren't a lot of midlevel openings," Johnson said, after
many states have cut education budgets. Phil Allen, 48, a veteran
PR professional in suburban Chicago, says he's had 70 job
interviews in the past year. He gave a 20-minute presentation as
part of an all-day interview for one opening this spring and left
thinking, "There's no way I'm not going to get this job."
"But I didn't get it," he said. "That's kind of a crushing
thing."
- Christopher S. Rugaber, AP Economics Writer
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SLOW RECOVERY
Three years into the recovery, hiring remains weak by one key
historical standard.
Consider what happened when companies slashed jobs in the
1981-82 recession. In September 1982, layoffs ran at an annual rate
exceeding 4 percent of U.S. employment. But then the economy
rebounded explosively. Job growth followed. By February 1984, 15
months after the recession had ended, hiring was occurring at a 6.5
percent annual pace.
During the Great Recession, job cuts were even steeper. They
occurred at a 6 percent to 7 percent annual rate. Yet since the
recession officially ended in June 2009, job gains have been
fitful. Hiring has only recently topped 2 percent of total
payrolls.
What's going on?
Mainly, the economy is too weak to drive more job growth.
Consumers are still cautious about spending. And the housing sector
is still weak. Both are weighing on the economy more than in
previous recoveries.
- Christopher S. Rugaber, AP Economics Writer