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By Robin Harding in Washington and Shannon Bond and Michael Mackenzie in New York
Published: June 3 2011 13:56 | Last updated: June 3 2011 19:11
Published: June 3 2011 13:56 | Last updated: June 3 2011 19:11
The US added just 54,000 jobs in May, confirming fears that the recovery of the world’s largest economy has stalled.
The rise in payrolls was far smaller than the 165,000 forecast by economists in a Bloomberg poll, and also well below this year’s average monthly gain of 182,000. The unemployment rate rose by a 10th of a percentage point to 9.1 per cent.
Job creation was weak in almost every sector of the economy, pointing to a general slowdown in growth that could threaten President Barack Obama‘s re-election prospects next year.
“Fundamentally it just shows that the economy doesn’t have the ability to sustain momentum because we’re in the workout period after a crisis,” said Steven Ricchiuto, chief economist at Mizuho Securities in New York.
The data will also raise fears of a ‘double dip’ recession , although it is more likely that the economy will continue to grow at an anaemic pace.
“If we get a report like this next month then people are going to be very concerned,” said David Semmens, US economist at Standard Chartered in New York. “There is no real leading indicator that points to any turnaround.”
Part of the decline may reflect disruption to supply chains caused by the Japanese tsunami in March. While manufacturing employment fell by 5,000 in the first decline since October, parts shortages would be more likely to lead to fewer shifts than to outright lay-offs.
The recent rise in oil and food prices – and the resulting damage to consumption and business confidence – is a more likely explanation for Friday’s weak job numbers.
Private sector employment rose by 83,000, but that was offset by a 29,000 decline in government payrolls as budget cuts bit. Service industries recorded the largest employment gains in May, adding 80,000 jobs. Retailers shed 8,500 positions.
“Our economy is not creating enough jobs, and Democrats’ binge of taxing, spending, borrowing and over-regulating is a big part of the reason why,” said John Boehner, the Republican speaker of the House of Representatives.
Austan Goolsbee, chairman of the president’s Council of Economic Advisers, argued that there are “always bumps on the road to recovery”.
Mr Ricchiuto said that the Federal Reserve has “painted itself into a corner” by expressing concerns about further quantitative easing . Any more fiscal stimulus, he added, would be inconceivable if not accompanied by a long-term political deal to control spending on entitlements such as Medicare.
In the wake of the jobs data, stocks and commodities declined while the dollar weakened and the 10-year Treasury yield fell back below 3 per cent.
At midday in New York, the S&P 500 was on course for its fifth straight weekly decline and was down 0.7 per cent. The dollar fell 0.5 per cent on a trade weighted basis.
The yield on 10-year Treasury notes fell to a low of 2.94 per cent, and by midday the benchmark was yielding just under 3 per cent. Crude oil eased below $100 a barrel while gold rose above $1,540 an ounce, shy of last month’s record of $1,563.
The rise in payrolls was far smaller than the 165,000 forecast by economists in a Bloomberg poll, and also well below this year’s average monthly gain of 182,000. The unemployment rate rose by a 10th of a percentage point to 9.1 per cent.
Job creation was weak in almost every sector of the economy, pointing to a general slowdown in growth that could threaten President Barack Obama‘s re-election prospects next year.
“Fundamentally it just shows that the economy doesn’t have the ability to sustain momentum because we’re in the workout period after a crisis,” said Steven Ricchiuto, chief economist at Mizuho Securities in New York.
The data will also raise fears of a ‘double dip’ recession , although it is more likely that the economy will continue to grow at an anaemic pace.
“If we get a report like this next month then people are going to be very concerned,” said David Semmens, US economist at Standard Chartered in New York. “There is no real leading indicator that points to any turnaround.”
Part of the decline may reflect disruption to supply chains caused by the Japanese tsunami in March. While manufacturing employment fell by 5,000 in the first decline since October, parts shortages would be more likely to lead to fewer shifts than to outright lay-offs.
The recent rise in oil and food prices – and the resulting damage to consumption and business confidence – is a more likely explanation for Friday’s weak job numbers.
Private sector employment rose by 83,000, but that was offset by a 29,000 decline in government payrolls as budget cuts bit. Service industries recorded the largest employment gains in May, adding 80,000 jobs. Retailers shed 8,500 positions.
“Our economy is not creating enough jobs, and Democrats’ binge of taxing, spending, borrowing and over-regulating is a big part of the reason why,” said John Boehner, the Republican speaker of the House of Representatives.
Austan Goolsbee, chairman of the president’s Council of Economic Advisers, argued that there are “always bumps on the road to recovery”.
Mr Ricchiuto said that the Federal Reserve has “painted itself into a corner” by expressing concerns about further quantitative easing . Any more fiscal stimulus, he added, would be inconceivable if not accompanied by a long-term political deal to control spending on entitlements such as Medicare.
In the wake of the jobs data, stocks and commodities declined while the dollar weakened and the 10-year Treasury yield fell back below 3 per cent.
At midday in New York, the S&P 500 was on course for its fifth straight weekly decline and was down 0.7 per cent. The dollar fell 0.5 per cent on a trade weighted basis.
The yield on 10-year Treasury notes fell to a low of 2.94 per cent, and by midday the benchmark was yielding just under 3 per cent. Crude oil eased below $100 a barrel while gold rose above $1,540 an ounce, shy of last month’s record of $1,563.
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