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Job growth slows sharply; unemployment rate at 9.1 percent

Employers added 54,000 jobs

- The Washington Times - Friday, June 3, 2011

The nation's job market provided more evidence of a broad slowdown in the economy in May, with a sharp deceleration of job growth sending the unemployment rate up to 9.1 percent, the Labor Department reported Friday morning.

Employers created only 54,000 new jobs during the month, down from 232,000 in April and an average of 220,000 in the prior three months. Private sector jobs rose by 83,000, but were partly offset by a 28,000 drop in jobs in local government — adding to a nearly half-million job losses in that sector since 2008.

While jobs were created in leading sectors such as health care and business services last month, the thriving manufacturing sector lost 5,000 jobs — the first job losses seen at factories since manufacturing started staging an impressive revival last year.

The unemployment rate was up from 9 percent in April and a low of 8.8 percent in March, with increases seen particularly among the long-term jobless who have been out of work for six months or more. Unemployment remains significantly lower than the peak of over 10 percent reached in 2009, however.

"It's subpar growth for sure," said John Silvia, chief economist at Wells Fargo Securities, noting that blue-chip economists are all reducing their forecasts for economic growth this year amid gathering evidence of a significant slowdown in the economy this spring. Wells Fargo expects U.S. growth to average no more than 2 percent, despite hopes earlier this year that it might surge to as high as 4 percent this year.

While healthy sectors of the economy continue to generate jobs, sectors such as construction and mortgage financing that were hit hard by the financial crisis and recession will continue to struggle, he said. Those sectors are not likely to attain the robust growth they saw during the housing boom for many years to come.

"We must face hard realities" and realize that many people who were pushed out of jobs will never regain those jobs and must train themselves for work in some other area, he said.

The permanent job losses in some industries is why the level of long-term joblessness is so high and continues to rise — reflecting a kind of "structural unemployment" that can only be corrected by people switching into new careers or moving to areas where jobs are more plentiful, he said.

Adding to the softening jobs picture, the average workweek was unchanged at 34.4 hours and wage growth remained modest at 1.8 percent in the last year.

"The economy is faltering," said Peter Morici, business professor at the University of Maryland, in part because Congress and the administration have not addressed deep structural problems in the economy such as high health care costs and huge trade deficits.

The number of people affected by the jobs drought is far greater than suggested by the 9.1 percent unemployment rate, he said. When millions of people who have dropped out of the labor force because they are too discouraged to keep looking for work are added to the officially unemployed, the unemployment rate is closer to 16 percent, he said.

Business Roundtable President John Engler noted that with government at all levels shedding jobs as authorities are forced to pare huge debts and deficits, the private sector has been the engine of job growth in the recovery. The government should focus on nurturing this private-sector growth, he said.

"Today's increase in the unemployment rate underscores the need for dramatic action to break down barriers to job creation," he said. "First among these are unnecessary regulations. Regulations are both a drag on job creation and on the economy."

Most economists attribute the spring slowdown in the economy to high gasoline prices, which are zapping consumer spending power, an intensification of the European debt crisis and April's earthquake in Japan, which disrupted shipments and sales in the manufacturing sector.

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