Job growth slows; unemployment rate drops (Huge Bias against Great News)

WASHINGTON - Cautious employers added just 75,000 new jobs in May, the fewest in seven months, in a fresh sign the national economy is losing momentum heading into summer.

Rising energy prices, higher borrowing costs and a cooling of the once red-hot housing market are the main forces shaping the slowdown in the country's overall economic activity. Those factors, along with sagging consumer confidence, are making companies wary of bulking up their payrolls in case the economy takes an unexpected turn for the worse, analysts said.

Taking a bit of the sting out of the sluggish job creation was the fact that the nation's unemployment rate dipped to 4.6 percent, the lowest in nearly 5 years.

Still, when the Labor Department's employment snapshot, released Friday, is viewed as a whole, it points to slower — not faster — economic speed ahead, analysts said. Wage growth also slowed, a development that may be disheartening to workers but comforted economists who worry about inflation taking off.

"The May employment report was weak in almost all dimensions," said Nigel Gault, economist at Global Insight.

Economic growth in the April-to-June quarter will probably clock in around a 2.5 percent pace or slightly better. That would mark a deceleration from the brisk 5.3 percent pace logged in the first quarter.

The count of new jobs generated last month was the smallest since October, when hiring practically stalled as the fallout from the Gulf Coast hurricanes jolted companies. It fell far short of the 170,000 new jobs economists had predicted.

Manufacturers, retailers, home builders, trucking firms, hotels and motels were among those shedding jobs last month. Financial firms, health care providers, educational services, accountants and bookkeepers, architects and engineers, and computer designers all boosted employment.

Job growth, which has been steadily weakening since February, was lower in March and April than previously reported. Employers added 175,000 jobs in March and another 126,000 in April — 37,000 fewer positions for both months combined than estimated a month ago.

"Firms have grown more cautious of taking on additional workers," said Stuart Hoffman, chief economist at PNC Financial Services Group.

On Wall Street, the Dow Jones industrials lost 12.41 points as investors wondered whether the economy was moderating too quickly.

In a brighter note, though, the unemployment rate dropped a notch from 4.7 percent in April to 4.6 percent in May, the lowest since July 2001.

The payrolls figure and the unemployment rate come from two different statistical surveys, which can provide — as in Friday's case — a somewhat conflicting picture of what is happening in the labor market.

The seasonally adjusted overall civilian unemployment rate — 4.6 percent in May — is based on a survey of 60,000 households. It showed that 288,000 people said they found employment last month, outpacing the number of people who couldn't find work.

Economists tend to put more stock, however, in the much broader business survey of 400,000 work sites that is used to calculate the payroll figures.

The latest employment report gave both Republicans and Democrats ammunition during an election year.

President Bush, facing low job-approval ratings, pointed to the 4.6 percent unemployment rate as evidence that "the American economy is powerful ... and it is prosperous and we intend to keep it that way."

"This economy is known as the wageless recovery," said Rep. Rahm Emanuel (news, bio, voting record), D-Ill. With gasoline and other prices rising, "America's middle-class families deserve better," he said.

Workers' average hourly earnings edged up by just 0.1 percent in May from the previous month to $16.62. Over the last 12 months, wages rose 3.7 percent, meaning paychecks are probably trailing inflation, said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group.

To fend off inflation, Federal Reserve Chairman Ben Bernanke and his colleagues in May bumped up a key interest rate for the 16th time since June 2004. They said their future rate decisions would rely heavily on what incoming barometers say about economic activity and inflation.

Some economists said the employment report boosts the odds that the Fed will leave rates alone at its next meeting, June 28-29. Others, however, still predict another rate increase. A government report on consumer prices, a closely watched inflation gauge to be issued on June 14, will be an important piece of the Fed decision-making puzzle.

Oil prices, which hit a record high of more than $75 a barrel in late April, are now hovering above $72 a barrel. Gasoline prices have topped $3 a gallon in some areas.

The Fed is in a tricky spot. It wants to make sure energy prices don't spark broad inflation and it also doesn't want its rate increases to crimp economic activity too much.

Adding to signs that the economy was shifting into a lower gear: The Commerce Department reported that orders placed with U.S. factories fell 1.8 percent in April, the biggest setback in three months.

Unemployment numbers does not count the millions of people who are underemployed, "involuntary part-time" workers (those who are working part-time, but want to work full-time), those who have lost their jobs and have become discouraged over time from actively looking for work, those who have retired before the official retirement age but would still like to work, etc.

Most economists will tell you the number of underemployed or discouraged employment seekers are around another 1 percentage point above the official unemployment numbers during a period of growing GDP AS WE HAVE NOW, and a little more in a recessionary period. Don't try to mitigate good news with deceptive economic information. Economists say it is always typical to have another 1 percentage point beyond the unemployment rate of the chronically unemployed or underemployed. There will always even in the best economy, and this is shaping up to be one of them, going to be a group of people who just can't seem to find steady work. A big part of it is their own lack of education and skills more than anything about the economy itself. This doesn't need to become another tired illegal alien debate. The fact is the US economy is beginning to show signs of labor shortages.

In case you did not see my reply to this same guy, here is something about that comment of his:

Most economists will tell you the number of underemployed or discouraged employment seekers are around another 1 percentage point above the official unemployment numbers during a period of growing GDP AS WE HAVE NOW, and a little more in a recessionary period. Economists say it is always typical to have another 1 percentage point beyond the unemployment rate of the chronically unemployed or underemployed. There will always even in the best economy, and this is shaping up to be one of them, going to be a group of people who just can't seem to find steady work. A big part of it is their own lack of education and skills more than anything about the economy itself. The fact is the US economy is beginning to show signs of labor shortages.

One other point. Unemployment numbers DO reflect people who were fired for cause yet their employers take pity on them and allow them to claim unemployment benefits. This happened to me once and I've seen it happen in other cases. So there are people in those unemployment numbers who lost jobs because of lack of performance or misconduct, not just economic displacement. Also, the "given up" crowd includes people who have started home based business. These in many cases have given people higher incomes than when they were employed by others. I know of several examples just in my own life. But it is also an economic reality business experts and economics gurus have noted as a growing trend stemming out of our Internet culture.

The MSM economists always do this. When they announced 1st quarter GDP it was said to "disappoint." GDP was subsequently updated to 5.3%, an excellent figure by historical standards, but it was said again to "disappoint" because it was anticipated the revision would be 5.6%

And if Kerry were president and this exact same set of economic circumstances had come about, the headline would be "Economy Continues to Pick up Steam from Confidence in New President."

I agree. But the one thing the LSM would fail to point out, is that the president, whoever it is at the time, never has a formal budget presented for 6-9 months in office. In other words, if sKerry were in office, there would have been nothing he'd have done that would have been legitimately attributable to him.

Unemployment numbers do, however, count all of the people who are collecting unemployment for one reason or another. Many people choose to collect for the maximum amount of time before they go back to work.

We could reduce unemployment by just shortening the amount of time that benefits would be paid.

This graph is a little behind just add in the last bar in your head and you can see that it is very low compared to all the way back to 1970. Pretty damn good really, gawd would i love it to go down even more and watch the media squirm having to report a lowest ever in 37 years!

Utter made up nonsense. Undocumented, unverified "Claims" about mythical "studies" are merely the screaming of people who simply REFUSE to deal with the Economic facts.
Simple question nukes all this nonsense. How do these people "dropping out of the labor market" live? I would LOVE to "Drop out of the labor market". This is PURE make believe used by Leftist "Economists" to justify their refusal to accurate address the facts because they are to a Republican's credit.

Utter nonsense to make up rationalizations to claim the numbers are "not really as good as claimed". They are the SAME numbers tallied the SAME way the the SAME economists raved about when Clinton was President. How you measure things must be consistent. You cannot use ONE standard when a Democrat is in the WH and another when the Republicans have it. That is intellectually dishonest.

How do these people "dropping out of the labor market" live?

They live with their brother, live with their sister, grandparents, parents, friend, boyfriend, girlfriend, etc. Or they are on food stamps, living in government housing, etc.

But this is only a fraction of the group that I referred to. The largest number are those who are unable to find a full-time job and have to settle for a part-time job with no benefits. Many companies are seeing this as a beneficial way to cut labor costs.

To have such a sustained level of low unemployment along with real wage stagnation is very suspect. It either nukes the existence of real wage stagnation or high levels of full employment.

They are the SAME numbers tallied the SAME way the the SAME economists raved about when Clinton was President.

During the late 90s, real wages rose. There was talk over labor shortages marked with increases in wages/salaries.

That is not happening today. Many job positions that paid "well" in the 1980s and 1990s, now pay near minimum wage: security guard, janitor, construction worker, meat packing industry jobs, etc. If there is such a high demand for labor, why have these wages decreased?

The drive by media strikes again. Only those maroons could take 5.3% GDP growth in the first quarter, monthly six figure jobs growth and 4.6% unemployment and call the picture "weak."

This is a fantastic report. The good news on inflation will reduce pressure on the Fed to keep bumping interest rates.

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