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June 7, 2011 > Few jobs added in May; unemployment up to 9.1 pct

Few jobs added in May; unemployment up to 9.1 pct

By Christopher S. Rugaber, AP Economics Writer

WASHINGTON (AP), Jun 03 - U.S. employers in May added the fewest jobs in eight months, and the unemployment rate inched up to 9.1 percent. The weakening job market raised concerns about an economy hampered by high gas prices and the effects of natural disasters here and abroad.

The key question is whether the meager 54,000 jobs added last month mark a temporary setback or are evidence of a more chronic problem. That total is far lower than the previous three months' average of 220,000 new jobs per month.

Private companies hired only 83,000 new workers in May - the fewest in nearly a year.

Stocks on Wall Street fell for the third straight day. The Dow Jones industrial average was down 76 points in late-morning trading. Broader indexes also dropped.

Many analysts suggest the economy will improve later this year, particularly if gas prices continue to decline.

But Friday's report underscores that the recovery will likely remain weak and unemployment high for many months.

``The recovery has not been derailed, but it's slow,'' said Michelle Meyer, an economist at Bank of America Merrill Lynch. ``We're still in a muddle-through period.''

Among the deepest job cuts were in local governments, which cut 28,000 jobs last month, the most since November. Nearly 18,000 of those jobs were in education. Cities and counties have cut jobs for 22 straight months and have shed 446,000 positions since September 2008.

The anemic pace of job creation poses a challenge to President Barack Obama's re-election prospects next year. The Conference Board, a business research group, predicts that the unemployment rate will be 8.5 percent by the end of next year. That would mean Obama would face re-election with a higher unemployment rate than any other post-war president has.

Yet there's little appetite on Capitol Hill for additional stimulus spending. And the Federal Reserve plans to wrap up its most recent effort to pump money into the economy at the end of this month.

White House economist Austan Goolsbee said the burden is now on the private sector to create jobs, as the days of a government-led recovery are nearing an end.

``You've seen corporate profits high,'' he said. ``It's now time to get that translated ... into the adding of jobs, building of factories and buying of equipment here at home.''

The jobs report followed a string of sluggish economic data in the past month that suggest the economy is growing more slowly.

The manufacturing sector, a key driver of the recovery, grew at its slowest pace in 20 months in May. Home prices in big metro areas have reached their lowest level since 2002.

Higher gas prices have left less money for consumers to spend on other purchases. And average wages aren't even keeping up with inflation. As a result, consumer spending, which fuels about 70 percent of the economy, is growing sluggishly.

Companies that depend on consumer spending shed jobs last month. Retailers cut 8,500 positions, after adding 64,000 in April. And leisure and hospitality, which includes restaurants and hotels, cut 6,000 jobs. That came after they added an average of 43,000 in the previous three months.

Economists have said that most of the factors slowing the economy are temporary. But some are now concerned that their impact is greater than they first envisioned.

``Economic activity has clearly hit a soft patch,'' said Steven Wood, chief economist for Insight Economics. ``The open question is whether this is temporary and will quickly reverse itself over the next couple of months or whether this is an adjustment to a slower permanent growth rate.''

Nariman Behravesh, chief economist at HIS, called it a ``pretty bad report. It's tempting to say it's an outlier, but I'm a little worried.''

More jobs are needed to sustain the economic recovery. They provide the income needed to support consumer spending, which accounts for about 70 percent of the economy.

Wages and salaries aren't providing much help. Average hourly earnings rose 1.8 percent in the past year, to $22.98 - not enough even to keep up with inflation.

More people entered the work force in May. But most of the new entrants couldn't find work. That pushed the unemployment rate up from 9 percent in April. The number of unemployed rose to 13.9 million.

And the government revised the previous months' job totals to show 39,000 fewer jobs were created in March and April than first estimated.

The weakness in hiring was widespread. Manufacturers cut 5,000 jobs, the first job loss in that sector in seven months. They included a drop of 3,400 jobs in the auto sector.

Car makers are cutting back on production because they are having a difficult time buying parts. Many auto parts, including some key electronic components, are made in Japan, and the March 11 earthquake and ensuing nuclear crisis in that country has disrupted supply chains.

There were some bright spots in May. Professional and business services added 44,000 positions, most of them in accounting, information technology services, and management.

Still, the economy must generate at least 100,000 jobs each month just to keep up with population growth and prevent the unemployment rate from rising. And economists say the gains need to be at least double that total to drive down the rate.

About 8.5 million Americans worked part time, even though they would have preferred full-time jobs. An additional 2.2 million have stopped looking in the past year.

When the unemployed are combined with part-time workers who would rather be working full time and people who have given up looking for jobs, roughly 25 million Americans are ``underemployed.'' That's equal to 15.8 percent of the work force.

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Associated Press Writer Julie Pace contributed to this report.

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