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Unemployment rises to 8.2 percent; huge disappointment for Main, Wall streets
69K jobs added in May, fewest in a year
The nation’s unemployment rate edged up from 8.1 percent to 8.2 percent last month as businesses from factories to office parks pulled back on hiring, the Labor Department reported Friday morning.
In a huge disappointment for Main Street and Wall Street, job growth fell sharply to 69,000 during the month, the weakest growth in a year, and revisions showed that only 77,000 jobs were created in April, far below the 115,000 previously reported. That meager job growth is only a fraction of the 226,000 jobs added each month during the first quarter, the department said.
“This is a major disappointment. There was major weakness in construction,” an industry that had seen unusual job gains in the winter because of mild weather, said John Silvia, chief economist at Wachovia Securities. The Dow Jones Industrial Average immediately dropped more than 150 points at the start of trading Friday morning, as Wall Street economists had predicted the job gains would be twice as large.
The slowdown was seen in many other industries besides construction, which has been whipsawed by unusual weather patterns this year. The vital business services sector, which is the heart of the U.S. economy and has created 1.4 million jobs since the end of the recession, lost 1,000 jobs in May. About the only businesses to see healthy job gains were health care, transportation and wholesaling.
“It is possible that the recent disappointing numbers reflect payback after stronger than usual hiring earlier in the year due to warmer than normal weather in the winter months,” said Chris Williamson, economist at Markit. However, he said it also could reflect a “fundamental” slowdown in the economy that will lead to further rises in the unemployment rate.
“Alarm bells should be ringing very loudly,” said Dan North, chief economist at Euler Hermes. The spring slowdown is “an ugly trend in this most important of indicators.” He predicted that the report will provoke a “heated” political debate about the health of the U.S. economy.
Republicans immediately jumped on the news as evidence that President Obama’s economic program is not working.
“President Obama’s failed policies have made high unemployment and a weak economy the sad new normal for families and small businesses,” said House Speaker John Boehner, Ohio Republican.
But White House Council of Economic Advisers chairman Alan B. Krueger said the report shows “the economy is still growing, but it is not growing fast enough.”
Mr. Krueger attributed the slowdown to “headwinds” hitting the economy from the European economic crisis, as well as the spike in gasoline prices this spring that is now on the wane. He noted that these obstacles are identical to the developments that helped slow the economy in the spring of last year.
In another measure of the spring pullback — which mirrors a similar downturn in the spring of last year after a robust start to the year — the average workweek declined 0.1 hour to 34.4 hours in May, and average hourly wages slumped to a 1.7 percent yearly rate — close to a record low.
The rise in unemployment reflected not only the slowdown in job growth, but a surge in people looking for work but unable to find jobs. About 642,000 more people went on a job hunt last month, but only 422,000 of those landed jobs, the department said.
“After an unexpected upswing at the beginning of the year, the labor market appears to be back in the doldrums again,” said Aparna Mathur, economist at the American Enterprise Institute.
While many have pointed to unusual weather patterns as the reason for the ups and downs, she said economists are “scrambling for an explanation” as to why the job market has fallen into a spring slump for the second year in a row.
One underlying source of friction, she said, is the millions of long-term unemployed people do not have the technical skills needed to fill many of the jobs that are coming open — creating a situation where both employers and the unemployed cannot find what they need and want.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
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