Posted on 06/02/2006 2:33:29 PM PDT by nckerr
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."
Democrats homed in on workers' slower wage growth.
"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.
Notice how they NEVER tell you who these "Economists" disappointed by the numbers are. No matter the number, it alwasy "Fails to meet expectations". Whoese? Economists working for the Democrat Party maybe?
WORST ECONOMY IN THE LAST 50 DAYS.
Here in central Oregon we have the same unemployment rate.
This 4.6% is call the "hard-core" unemployed - they will never have jobs.
We don't have high "new job rates" either - there are simply too many jobs and not enough workers to fill them.
Darn economy.
A person from the Heritage Foundation said employed teenagers were once at 50% of their total population, 10 years ago. Now that is down to 40% of teenagers are employed. He said if the minimum wage increases, that would be bad for adults trying to find work because they would have to compete with a huge influx of teens entering the workforce, wanting to earn those same wages.
Recently in the past couple months, several hundreds of thousands of people have taken part-time work. According a report on CNBC, half of those surveyed want to work full-time but because of the job market, they had to settle for part-time work.
Just as you have people who take themselves out of the home buying market when the housing prices are too high and enter the housing market when the prices are low. We have many people who will enter the workforce when there is a real demand for workers, represented by an increase in the wages being offered. This natural process has aborted by the government and by business. Businesses turn to the government when they cannot find workers at the wage they want to pay and request indentured servants from other countries to work for them. Or sometimes business employ illegal immigrants who are willing to work for less than Americans.
Economists have stated that the country needs to add 200,000 jobs per month (or about 2 million jobs per year) just to keep up with all the new people entering the job market.
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.
Unemployment figures are limited to certain group of people. This is evident during the early stages of an economic boom when unemployment often rise. This is because people join the labor market because of the improving job market, but until they have actually found a position they are counted as unemployed. Similarly, during a recession, the increase in the unemployment rate is moderated by people leaving the labor force.
As the article states, 4.6% does make the interest rates go up, because the employers have to pay more to get qualified help. However, 4.6% is great news for our economy and should really help in the fall elections.
I definately agree with that statement. Dan Rather would lead with this story on his Evening "News".
On the other hand Jeannine, that low "new jobs" figure could be an indication that employers have become more "cautious" about hiring illegal aliens.
I believe my standard, "We're DOOOOOOOOOOMED!" works well here.
My afternoon ConservaBabe on local Talk Radio just read articles identical to this one from EVERY major MSM news outlet! Of course, she shot them all down...
If the unemployment rate went to 0, the MSM would spend a half hour whining about all of the unemployment office workers who would lose their jobs.
That is amazing spin. A 12.41 difference being significant?
I think they're friends with Katie's "some people"
You are making too much sense.
Of course the article fails to mention the economy is likely slowing from smoking 5.3% economic growth in the 1st quarter to something closer to the 3.5% range which is still strong, healthy growth. No, instead they make it look like the economy is coming to a screeching halt or entering a recession. Yes, growth may be slowing but it's slowing from tremendous growth to strong growth. It's like saying the NASCAR race car is slowing from 175 mph to 100 mph. It slowed down but is still speeding along.
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."
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.