Is the economy headed for another meltdown or are we just experiencing a hiccup in the national recovery?
That’s what experts are asking after after the Bureau of Labor Statistics released its latest employment numbers for May at the end of last week, which were much lower than the anticipated addition of 150,000 jobs.
Overall, the nation added only 69,000 jobs, while the unemployment rate rose slightly to 8.2 percent. There were a total of 12.7 million unemployed people, with the number of long-term unemployed people rising from 5.1 million to 5.4 million.
Lawrence Creatura, a stock portfolio manager with Federated Investors, told the Associated Press:
“The jobs report was just bad … What we’re seeing is that the job market, post-financial crisis, has not been able to reignite itself. It hasn’t been able to set off that chain reaction where an improving economy creates more jobs, and more jobs improve the economy, creating more jobs. That hasn’t started yet.”
Most major industries didn’t see a lot of movement in terms of employment, with employers in the healthcare, transportation and warehousing, and wholesale trade industries being the only ones to add a significant number of jobs. On the downside, the construction industry took a turn for the worse.
Including the May employment numbers, the U.S. has added an average of 96,000 jobs during each of the last three months, which is down from the 245,000 average gain between December and February.
In addition, experts point out that the main reason the increase in unemployment was so small is because a lot of people stopped looking for work, so they’re no longer counted among the unemployment rolls.
And even worse – the BLS revised its employment numbers for March and April, dropping them from 154,000 to 143,000 and from 115,000 to 77,000, respectively.
Sheila Dewan at The New York Times notes:
“Economists can explain away a month or two of dismal numbers, but a three-month run is difficult to ignore. The economy now seems to be following the spring slowdown pattern of the last two years — a bright spot of accelerating growth followed by a slump. The news on Friday even raised mentions of a possibility that dogged last year’s forecasts but did not come to pass: another recession.”
Of course, the weak employment figures are having an effect on the entire global market as well, especially since they came shortly after other data that points to weakening economies in Europe and Asia. Financial markets from Wall Street to Germany took a dive today.
A Few Positives
The good thing is that a few key industries did continue adding jobs during May:
- Transportation and warehousing – The industry added 36,000 jobs over the month, with ground passenger transportation accounting for most of that gain.
- Healthcare – With an addition of 33,000 workers, the healthcare industry continued its ever-growing trend, with much of the employment gain coming from the ambulatory healthcare services sector.
- Manufacturing – One of the most important industries to our economy, manufacturing added 12,000 jobs last month, with employers in fabricated metal products and primary metals hiring the most workers.
Aside from the overall paltry employment figures, the BLS report found that most industries saw little to no change in employment, while one of our most significant industries actually lost workers.
The construction industry, which along with manufacturing has long been a primary indicator of the overall health of the economy, lost 28,000 jobs during May. Payrolls were cut in specialty trade contractors and heavy and civil engineering construction.
Most of the other industries that we pay close attention to on a monthly basis – professional and business services; mining and logging; retail trade; information; financial activities; leisure and hospitality; and government – all saw little or no change in employment last month.
In reality, the economy sways back and forth so much that it’s hard to predict what effect the May employment numbers will have in the next several weeks and months.
As Tim Duy wrote over at Forbes:
“Two thoughts come to mind. First, I have said it before and I will say it again: If you become either too optimistic or too pessimistic about the path of the US recovery, you will almost certainly be slapped down in a matter of months.
“Second, this summer is looking like a carbon copy of 2011. The US data is turning softer just while the European saga is heating up. This time, we have some additional icing on the cake, with emerging markets faltering as well. And that black box that is China could be in free fall for all we know – commodity prices and cash outflows are pointing to some real distress.”
Many experts think that if legislators in Washington, D.C. don’t do anything to help the economy improve at a faster rate, the Federal Reserve will be forced to step in
Sandra Pianalto, president of the Federal Reserve Bank of Cleveland, told the Wall Street Journal:
“Right now I feel that our accommodative monetary policy is appropriate given my outlook. I always want to balance the risks and costs of doing more. I have an outlook for inflation to remain close to our 2% objective through 2014. It’s important to take a balanced approach on what more we can do for broader economic growth. We need to make sure that we maintain our stable price objective so you have to balance those two objectives.”