The U.S. economy picked up a shockingly low 54,000 jobs in May, the Labor Department reported on Friday. The unemployment rate ticked up slightly to 9.1 percent. April had seen the addition of 244,000 jobs, and the median estimate of economists surveyed by Bloomberg for May was 165,000. Analysts generally agreed that any number less than 100,000 would cause turmoil in the markets.
“There’s very little good news in this data,” said Nariman Behravesh, chief economist at IHS Global Insight. Markets reacted accordingly; the Dow Jones industrial average fell 97.29 points on Friday, a drop of 0.79 percent.
President Obama, speaking at a Chrysler plant in Toledo, Ohio, in the afternoon, reminded Americans that “there are always going to be bumps on the road to recovery.” He said the earthquake and tsunami in Japan as well as instability in the Middle East contributed to uncertainty in the U.S. economy. Administration officials sought to play up the fact the economy did add private-sector jobs – the fact that numbers fell well below expectations notwithstanding – and downplay the implications of the second consecutive uptick in the unemployment rate in the last two months.
“There are always bumps on the road to recovery, but the overall trajectory of the economy has improved dramatically over the past two years,” Council of Economic Advisers Chairman Austan Goolsbee said in a statement. “While the private sector has added more than 2.1 million jobs over the past 15 months, the unemployment rate is unacceptably high.”
GOP leadership, meanwhile, placed the blame on Obama.
“One look at the jobs report should be enough to show the White House it’s time to get serious about cutting spending and dealing with our ailing economy,” said House Speaker John Boehner, R-Ohio.
The employment numbers reflected minor gains in professional and business services, health care, and mining, but those were tempered by a decline in local government jobs. Average hourly earnings were up 0.3 percent. But those glimmers of positive news were eclipsed by the report’s dramatically disappointing jobs number.
“This is a big, big negative surprise, and it’s going to upset a lot of people and temper the political discussion in Washington,” Behravesh said. “It may give some of the big budget cutters a little bit of pause, it may affect some of those discussions that are going on about deficit reduction.”
As Washington has become consumed by increasingly tense budget discussions in the run-up to a debt limit vote, weak economic indicators rolling in over the past week suggest that growth may be a more pressing issue than the deficit.
After the release of a disappointing ADP jobs report on Wednesday that found just 38,000 jobs added in May (far below the 175,000 consensus projection), the Dow Jones industrial average dropped 2.22 percent, the market's worst day since August.
Tuesday brought the revelation that home prices had fallen 4.2 percent and hit a new low in the first quarter of 2011, according to data released by Standard & Poor's and Case-Shiller. The National Association of Realtors’ pending home sales index fell 11.6 percent last Friday, shocking economists who had predicted a 1 percent decline.
Consumer confidence decreased, and U.S. manufacturing growth also slowed substantially in May, as the ISM index fell to 53.5, its lowest level since September 2009. New orders, production, and export measures all plunged.
Deutsche Bank analysts initially predicted an increase of 300,000 nonfarm jobs in May after April’s strong report. They revised their estimate to 160,000 on Thursday. Nomura predicted an increase of just 85,000 new jobs, citing the Japanese disaster’s effect on the U.S. auto industry and poor weather conditions in addition to the string of bad economic numbers this week.
While Behravesh said he couldn’t pinpoint the cause of such a dramatic shortfall, he suggested the biggest contributors were likely rising energy prices and businesses’ uncertainty over ongoing debt discussions in Washington.
“For a while they were thinking they were out of the woods,” he said. “Now I think they’re saying, 'let’s wait and see.'”
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