Author: Catherine Rampell
Publication: The New York Times
Date: June 3, 2011
URL: http://www.nytimes.com/2011/06/04/business/economy/04jobs.html?nl=todaysheadlines&emc=tha2
After several months of strong job growth,
hiring in the United States slowed sharply in May, suggesting the economy
may be running out of steam once again.
The Labor Department reported on Friday that
the nation added 54,000 nonfarm payroll jobs last month, after an increase
of about 220,000 jobs in each of the three previous months. The gain in May
was about a third of what economists had been forecasting. The unemployment
rate, meanwhile, edged up to 9.1 percent from 9.0 percent in April.
"The economy clearly just hit a brick
wall," said Paul Ashworth, chief United States economist at Capital Economics.
"It's almost as if it came to a complete standstill."
While most analysts do not believe that the
country will slide back into a recession - which would technically mean that
the economy would start shrinking again - they acknowledge that with such
low levels of hiring, the recovery is barely perceptible to many Americans.
In Washington, today's hiring challenges
have been receiving less attention than tomorrow's fiscal ones. But a week
of dismal news on manufacturing, housing and car sales may shift the discussion.
Some pressure is building on the Obama administration and Congress to delay
federal spending cuts, which economists say will weigh down the fragile recovery.
Liberal groups have renewed their calls for more aid to the states and more
aggressive action from the Federal Reserve.
In some ways the moment is reminiscent of
a year ago, when the economy also slowed abruptly just as it seemed to be
gaining momentum. At the time, the slowdown was attributed to worries over
the European debt crisis, just as Friday's report was partly attributed to
temporary stresses from higher energy prices and natural disasters. Last year's
downshift was followed by additional federal spending and another round of
asset purchases by the Federal Reserve.
In remarks to Chrysler workers in Toledo,
Ohio, President Obama conceded that the economy was still weak, and that policy
makers had more work to do.
"Even though the economy is growing,
even though it's created more than two million jobs over the past 15 months,
we still face some tough times," he said. "You know, it's just like
if you had a bad illness, if you got hit by a truck, it's going to take a
while for you to mend. And that's what's happened to our economy. It's taking
a while to mend."
Republicans, meanwhile, countered that Democratic
efforts to revive growth through public spending programs have failed and
renewed their calls for sharp cuts in federal spending and regulation to spur
corporate investment.
Though the White House cautioned against
putting too much weight on one report, Friday's release showed disturbing
trends across the economy.
Job growth for April and March was revised
downward. State and local governments, struggling with severe budget shortfalls,
continued to shed jobs in May. They are expected to keep laying off workers
for months to come.
Private companies added jobs, but the pace
of hiring fell to its lowest level in a year. The biggest gains were in professional
and business services and in health care services, which grew steadily even
during the recession.
One particularly unsettling note was the
lack of a pickup in temporary help services. Temp hiring is considered a bellwether
for broader hiring, since employers often try out temporary employees when
considering whether to take on additional permanent staff. Employment in temporary
help services was essentially unchanged in May and April.
Another leading indicator - the length of
the workweek - was also disappointing. Usually businesses have existing employees
work longer hours before hiring more workers. But the average did not budge
in May.
Manufacturers delivered another blow by ending
a six-month streak of job gains. They instead eliminated 5,000 jobs in May.
"They were our bright spot for so many
months," said Heather Boushey, a senior economist at the Center for American
Progress, a liberal research organization. "They were what was pulling
the economy forward."
Stock prices had fallen earlier in the week
as expectations about the jobs report had deteriorated. The latest numbers
initially sent markets tumbling on Friday, with oil prices and bond yields
declining. The Dow Jones industrial average was down 133 points, or 1.1 percent,
within minutes after the opening bell, though stocks later recovered some
of those losses.
For the last few months, economists had been
predicting that the recovery was speeding up and that a sharper bounce-back
was imminent, only to be disappointed again and again. They are now left to
hope that once certain temporary problems pass - like the automotive supply
chain disruption caused by the Japanese earthquake and tsunami, and higher
oil prices caused by unrest in the Middle East - a robust recovery will finally
burrow out from beneath the rubble.
"You are always going to have some good
things and some bad things that happen, always," said Neal Soss, chief
economist at Credit Suisse. "Why do the downs feel so much more threatening
these days? Because economic growth should be much faster. Any little adversity
feels much worse when growth is so much closer to zero."
Research from economists like Carmen Reinhart
and Kenneth Rogoff has shown that recoveries after financial crises are often
slow and bumpy. But policy makers have been more focused on fiscal concerns
- pushed by a recent warning from Moody's about the country's credit rating
- as opposed to finding ways to accelerate the recovery.
"My fervent hope is that this shocks
policy makers into realizing the most urgent problem in front of us right
now is jobs," said Ms. Boushey.
Economists said that the pace of job growth
thus far has been too slow to reverse much of the damage wrought by the recession,
which has left nearly 14 million people unemployed. Six million have now been
out of work for more than six months.
"There are just so many people jumping
around with great specialized résumés and willing to work for
nothing," said Bob Hiller, 64, an architect in Tucson who was laid off
in October 2009. "It's hard to compete."
Mr. Hiller's jobless benefits will soon run
out because Arizona's Legislature never updated a state law that would allow
workers to receive more federal money. Unable to find work, he is trying to
start an architectural consulting business to help older people renovate their
homes to accommodate them as they age.
"Everybody seems to think it's a great
idea and that I should do it," he said, "but it's hard to take it
to the next level when I barely have enough money to keep the lights on."
