Hiring in U.S. Slowed in May With 54,000 Jobs Added

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Job seekers at Los Angeles Mission's Skid Row Career Fair on Thursday.

By CATHERINE RAMPELL
Published: June 3, 2011


After several months of strong job growth, hiring in the United States slowed sharply in May, suggesting the economy is running out of steam once again.

The Labor Department reported on Friday that the nation added 54,000 nonfarm payroll jobs last month, after an increase of about 220,000 jobs in each of the three previous months. May’s job gain was about a third of what economists had been forecasting.

The unemployment rate ticked up to 9.1 percent from 9.0 percent in April.

“The economy clearly just hit a brick wall,” said Paul Ashworth, chief United States economist at Capital Economics. “It’s almost as if it came to a complete standstill.”

Friday’s dismal job numbers capped a week of disappointing economic news on manufacturing, housing and retail activity. Pressure is now mounting on the Obama administration and Congress to delay deficit-reduction measures, which economists think will put a further drag on the fragile recovery. Already liberal groups have renewed their calls for more aid to the states and more aggressive action from the Federal Reserve — even as a warning from Moody’s about the country’s sterling credit rating has galvanized Republican support for spending cuts.

In some ways the moment is reminiscent of last spring, when the economy also braked abruptly just as it seemed to be gaining momentum. At the time, the slowdown was attributed to worries over the European debt crisis, just as Friday’s numbers have been attributed in part to temporary stresses from higher energy prices and natural disasters. Last year’s downshift was ultimately followed by additional federal spending and another round of asset purchases by the Federal Reserve.

The latest jobs numbers sent markets tumbling, with oil prices and bond yields declining. The Dow Jones industrial average was down 133 points, or 1.1 percent, within minutes after the opening bell, though stocks later recovered some of those losses.

The biggest employment gains were in professional and business services and in health care services, which grew steadily even during the recession.

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. Private companies added jobs, but the pace of hiring fell to its lowest level in a year.

And there are signs that hiring problems may persist.

One particularly unsettling figure in Friday’s report 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 additional permanent staffers. 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,” Ms. 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 Augustine Faucher, director of macroeconomics at Moody’s Analytics. “I realize 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 Neal Soss, chief economist at Credit Suisse. “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 recovery is barely perceptible to many Americans. The jobs deficit has not gotten nearly as much political attention as the nation’s unsustainable fiscal deficit, however.

“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 Heather Boushey, a senior economist at the Center for American Progress, a liberal research organization. “My fervent hope is that this shocks policy makers into realizing the most urgent problem in front of us right now is jobs.”

Nearly six million workers have been out of a job for more than six months — and 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.”

Mr. 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.”

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