Weak job growth feeds concerns of slowdown
WASHINGTON — The nation’s long, hard ride to recovery went off track in the spring: Job growth slowed for the second straight month, raising fresh fears about the underlying strength of the economy.
In a disappointing development for President Obama’s reelection campaign, employers added a modest 115,000 jobs in April, barely enough to keep up with the natural growth of the workforce. The unemployment rate inched down to 8.1% — not because more people got jobs but because more discouraged workers dropped out of the labor market.
“They’ve given up looking for work because they don’t think there are jobs for them,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “That’s a very bad sign.”
Overall, the picture that emerges is of an economy that isn’t tipping into recession but is expanding at such a frustratingly slow pace that it remains highly vulnerable to shocks. Among those shocks are high oil prices, the problems in debt-strained Europe and a slowdown in the Chinese economy.
The April jobs report, issued by the Labor Department, was eagerly anticipated by policymakers and analysts seeking clues about the economy’s direction. Job growth in March had slowed sharply, after three winter months of gains averaging a solid 252,000 jobs. Some analysts were hoping the report would show that the nearly 3-year-old recovery might be heading into a new phase of more robust hiring and growth.
Instead, the report fed concerns that the economy, after showing some muscle in the winter, is now afflicted by a spring malaise, as has been the case for each of the last two years.
“The details of this report are disconcerting,” said Patrick O’Keefe, economic research director at J.H. Cohn, an accounting and advisory firm in New Jersey. Apart from a rebound in retail and temporary-help jobs, almost all of the other industries showed weaker hiring activity. Government payrolls fell back again. Workers’ earnings hardly budged and employees’ weekly hours of work were flat. “It’s just an across-the-board deceleration,” he said.
The report provoked strong reactions from investors and presidential candidates. Financial markets in the U.S. and Europe skidded, with the Dow Jones industrial average ending down 1.3% to close at 13,038.
For investors, the latest jobs report was in some ways the worst of both worlds. Job growth decelerated enough to raise worries about the economy but not enough to push the Federal Reserve to provide more monetary stimulus, said Neil Dutta, an economist at Bank of America/Merrill Lynch.
Mitt Romney, the presumptive Republican presidential nominee, called the report “terrible and very disappointing,” arguing that the economy should be creating 500,000 jobs a month after such a deep recession. “The president’s policies have simply not worked,” he said in an interview with “Fox & Friends.”
Obama sought, as he has in the past, to stress the longer term, emphasizing the improvement from the depths of the downturn while reiterating that more work remains.
“After the worst economic crisis since the Great Depression, our businesses have now created more than 4.2 million new jobs over the last 26 months, more than 1 million jobs in the last six months alone,” he said in a speech Friday at Washington-Lee High School in Arlington, Va.
Because of weather, analysts said, the job-growth slowdown in April and March probably overstated the actual deterioration. The mild winter, they said, artificially inflated payrolls in December, January and February; some of those gains cut into future hiring. Construction firms, for example, had a hiring spurt in December and January but haven’t seen an increase in jobs since.
The U.S. economy grew at a moderate 2.2% annual rate in the first quarter, helped by a surge in consumer spending and improvement in the long-depressed housing market. Car sales have been strong, and demand for credit has been growing. But the weak jobs report is likely to hurt confidence, prompting consumers to pull back spending and already cautious businesses to delay hiring and investment decisions.
Other analysts, citing the distortions caused by the warm winter weather, said they expected job growth to rise again to 175,000 to 200,000 in the coming months — a pickup from the average job growth of 153,000 a month last year. But even that wouldn’t be anything to write home about, said Heidi Shierholz, an economist at the Economic Policy Institute, who worries about the fresh crop of college graduates who will soon be entering the job market.
“Their prospects are better than for the class of 2011, but not by much,” she said. “It’s still very grim.”
Among the few bright spots in April’s report, manufacturing continued to perform well. Factory payrolls rose by 16,000 jobs last month, most of them at metal and machinery shops, although that was down from an average increase of 41,000 in each of the preceding three months.
Government payrolls, which seemed to be stabilizing earlier this year, fell by 15,000.
From the total number of new jobs created last month, the unemployment rate should not have changed at all last month. But the rate slid to 8.1% as the labor force — those who are working or looking for work — shrank by 342,000 in April.
With the slow economy discouraging workers and prompting some to go back to school or retire, the share of the working-age population that had jobs or were looking for jobs in April fell by 0.2 percentage point to a 30-year low of 63.6%.
The comparable labor participation rate for men 20 and older dropped to 72.9% last month — the lowest since record-keeping began in the late 1940s. For women 20 and older, the participation rate remained at 59.3% in April; it hadn’t been lower than that since 1995.
Alan Krueger, Obama’s chief economic advisor, acknowledged the shrinking labor force in April. But he said that the jobless rate had fallen by a full percentage point since last August — and that nearly three-quarters of that drop was attributable to increased employment.
But Baker, the Washington economist, said that some of that three-quarters was also because of statistical adjustments in the population.
At any rate, Baker said, other measures looking at the progress from last August to April don’t look so good. The percentage of the working-age population with jobs — a figure that economists consider one of the most important labor indicators — was 58.3% in August. That edged up to 58.4% in April.
“It’s not much, it’s pretty trivial,” he said.
