Unemployment notches up to 9.1% in May as employers add just 54,000 to payrolls

The nation’s job market took a turn for the worse last month as employers abruptly curbed their hiring and the unemployment rate edged up to 9.1%, the Labor Department said Friday.

The disappointing report provided the latest and strongest evidence of a sputtering economic recovery. In recent days, various data have pointed to a slowdown in manufacturing and consumer spending, as well as persistent weakness in the depressed housing market.

Employers in May added just 54,000 to their payrolls, less than half of what’s needed just to keep pace with the expanding working-age population. The puny job growth came after three straight months of solid payroll increases that averaged 220,000 a month.

And the jobless rate, after steadily declining during the winter, rose for the second month in a row. Unemployment was 9% in April and 9.6% in May of last year.

“No one knows on one month’s data … but this one is a real sign of fragility and danger,” said Ron Blackwell, chief economist at the AFL-CIO. “Basically, this is what economic stagnation feels like.”


Blackwell and some other analysts and Democratic leaders in Washington immediately called for more government action to spur job growth, such as stronger support for infrastructure building and further monetary stimulus from the Federal Reserve. The Fed’s $600-billion bond-buying program, aimed at holding down long-term interest rates, is set to expire at the end of this month.

But Friday’s report seemed only to harden partisan positions over budget deficits and other economic policies to energize the nation’s recovery from the deep recession, which technically came to an end two years ago this month.

Republican leaders laid the blame of the weak economic and job growth to flawed Obama administration policies, insisting Friday that instead of more government spending, tax cuts and reduced regulations are the way to go.

“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) at a GOP news conference Friday morning.

President Obama on Friday morning headed to Toledo, Ohio, where he was expected to defend his economic policies and tour the Chrysler auto plant there. The federal government’s bailout of Chrysler and General Motors during the recession was highly controversial, but the domestic auto industry has since regained its footing. Nonetheless, Friday’s jobs report provided no boost for Obama as employment in the U.S. car-manufacturing industry fell by 3,400 over last month.

Manufacturing, which had been leading the recovery, on the whole lost 5,000 jobs in May, reversing months of healthy gains that, until last month, totaled 243,000 since December 2009.

Apart from healthcare and some professional services, notably accounting and computer systems work, there was little or no net job gain in other service-producing sectors of the economy. And local government continued to be a drag on the economy, shedding 28,000 jobs, most of them at schools.

There were indications that some of the weakness in the hiring was due to temporary factors.

Supply-chain disruptions stemming from Japan’s earthquake and tsunami in March most likely contributed to the loss in auto-manufacturing employment last month. Higher fuel prices, although easing a bit in recent weeks, also may have played a role in restraining hiring by retailers and restaurants, among other businesses.

Higher energy prices have weighed on consumer spending and also cut into business profits. Concerns about the nation’s budget deficits and the looming deadline to raise the debt ceiling have further eroded confidence.

U.S. Labor Secretary Hilda Solis said the budget uncertainties -- and perceptions that Washington isn’t doing enough to help the economy -- probably took some steam out of private job growth, which has totaled 2.1 million in the last 15 months.

“I am concerned about it,” she said of the May jobs report in an interview, “but I don’t think it’s going to determine where we go.”

Wall Street was braced for a poor jobs report, but the payroll numbers came in even smaller than the lowered expectations from analysts, which averaged about 160,000. Stock prices have broadly retreated in recent days, and were down moderately on Friday. Further declines in stocks could sap consumer spending even more.

“Looking ahead we see some risk that total payrolls will continue to disappoint during the summer as state and local government layoffs of teachers continue to feed into the data as the school year ends,” economists at UBS Investment Research said in a research note.

Friday’s Labor Department report showed that for all employees on private-sector payrolls last month, numbering about 131 million, hourly earnings averaged $22.98. That was up 41 cents from a year ago -- or 1.8%, which is below the current pace of inflation.

The officially unemployed, meanwhile, held steady at about 13.9 million last month. But the share of those who have been without work for six months or more, the so-called long-term unemployed, jumped to 45.1%, near a record high.

In addition, the ranks of part-time workers who said they couldn’t find full-time jobs stood at 8.5 million last month. And there were 822,000 discouraged workers who have stopped looking for jobs because they saw little hope of getting hired. Taken together, the level of unemployed and underemployed was 15.8% in May, compared with 15.9% in the prior month.

Most analysts still expect the economy to pick up from the sluggish pace of growth in the first half of this year, but many have recently marked down their expectations for economic and job growth for the remainder of the year. Forecasters at Moody’s Analytics, a leading research firm, now see employers adding fewer than 200,000 jobs a month for the rest of this year, a pace that would barely make a dent in the high unemployment rate.

In recent economic recoveries, small businesses accounted for an outsized share of the job growth. But small firms haven’t done nearly as well as large companies, many of which have reported outstanding profits. The outlook for hiring by small employers dipped in the latest monthly survey conducted by the National Federation of Independent Business. Its May survey found a drop in the share of firms planning to add workers in the next three months, while those planning to reduce staff increased slightly.

“With one in four owners reporting ‘weak sales’ as their No. 1 business problem, there is little need to add employees, especially with the uncertainty about future labor costs arising from new regulation and legislation,” said William Dunkelberg, the NFIB’s chief economist. “And, if Congress doesn’t deal effectively with the trillion-dollar deficits, that is worrisome as well.”