Hiring in US slows down sharply in May

The Labour Department reported, on Friday that the United States added 54,000 nonfarm payroll jobs last month, following an increase of 2,32,000 jobs in April.

May’s job gain was about a third of what economists had been forecasting. The unemployment rate ticked up to 9.1 per cent from 9.0 per cent in April.

“The economy clearly just hit a brick wall,” said Capital Economics chief United States economist Paul Ashworth.


“It’s almost as if it came to a complete standstill.” The dismal numbers may change the economic debate in Washington and potentially revive calls for the Federal Reserve to engage in another round of asset purchases, Ashworth said.

Democrats and labour-oriented groups have also amplified their pleas for Congress to delay deficit-reduction measures. “Living here in Washington, in the past few weeks there has been all this talk about deficits and the debt ceiling as though that were the biggest problem right now,” said liberal research organsiation Centre for American Progress senior economist Heather Boushey.

“My fervent hope is that this shocks policy makers into realizing the most urgent problem in front of us right now is jobs.” The disappointing employment numbers sent markets tumbling, with oil prices and bond yields declining. The Dow Jones industrial average was down 133 points, or 1.1 per cent, within minutes after the opening bell.

The biggest job gains were in professional and business services and in health care services, which have been growing steadily for years. State and local governments, struggling with severe budget shortfalls, continued to shed jobs. They are expected to keep laying off workers for months to come.

One particularly unsettling figure was in hiring for temporary help services. Temp hiring is considering a bellwether for broader hiring, since employers often try out temporary employees when considering whether to take on more permanent staff members. Employment in temporary help services was essentially unchanged in May, however.

Another leading indicator, the length of the workweek, was also disappointing. Usually businesses start working their existing employees harder and longer before hiring more workers. But the average workweek did not budge in May, a factor that does not bode well for the many workers waiting on the sidelines.

Manufacturing employers delivered another blow to the economy by ending their six-month streak of continued job gains. Manufacturing companies eliminated 5,000 jobs over all in May.

“They were our bright spot for so many months,” Boushey said. “They were what was pulling the economy forward.” While any job gains at all are welcome, the pace of job growth thus far has been too slow to reverse much of the damage wrought by the Great Recession, which has left nearly 14 million unemployed workers in its wake. For the last few months economists had been predicting that the economy was finally gathering steam and that a sharper bounce-back was imminent, only to be disappointed again and again.

The lackluster employment figures for May, as in months past, may be partly attributable to temporary factors, like the automotive supply chain disruption caused by the Japanese earthquake and tsunami and higher oil prices caused by unrest in the Middle East.

Economists have been hopeful that as these troubles pass, a robust recovery will finally burrow out from beneath the rubble. “I do think there’s more strength in the economy than recent numbers have been indicating,” said Moddy’s analytics macrpeconomics director Augustine Faucher. “I realise that’s not much consolation for people who are already out of work.”

The problem, of course, is that this recovery has been unusually frail; usually a sharp recession like the one that began in 2007 is followed by an equally sharp recovery, whereas this time growth has been very slow. Had the underlying economy been stronger, a shock like the sudden rise in energy prices this spring might not have been so troubling.

“You are always going to have some good things and some bad things that happen, always,” said Credit Suisse chief economist Neal Soss. “Why do the downs feel so much more threatening these days? Because economic growth should be much faster. Any little adversity feels much worse when growth is so much closer to zero.”

While most economic analysts do not believe that the economy will slide back into a recession, which would technically mean that the economy would start shrinking again, they acknowledge that with such low levels of hiring, the expansion is barely perceptible to many Americans.

That is especially true for the nearly six million workers who have been out of a job for more than six months and who are still waiting for the recovery to reach them. “There are just so many people jumping around with great specialized résumés and willing to work for nothing,” said Bob Hiller, 64, an architect in Tucson who was laid off in October 2009. “It’s hard to compete.”

Hiller’s jobless benefits will soon run out because Arizona’s Legislature never updated a state law that would allow workers to receive more federal money. Unable to find work, he is trying to start a new architectural consulting business to help older people stay in their homes through accommodative renovations.

“Everybody seems to think it’s a great idea and that I should do it,” he said, “but it’s hard to take it to the next level when I barely have enough money to keep the lights on.”