A shadow fell across America’s economic recovery on Friday, as the Labor Department’s monthly report showed that job growth was weak in the private sector, provoking a precipitous sell-off in the stock market.þþThe headline numbers for May suggested reason for optimism — employers added 431,000 jobs and the jobless rate fell to 9.7 percent, from 9.9 percent in April. But the underlying numbers showed that almost all of the growth came from the 411,000 workers hired by the federal government to help with the Census. Most of those jobs will end in a few months. þþBy contrast, the private sector created 41,000 positions, far short of expectations for 150,000 to 180,000 jobs. And the number of long-term unemployed, those Americans out of work for 27 or more weeks, remained at its highest level since the Labor Department began collecting such data in the 1940s. þþThe ailing American labor market and continued threatening economic news out of Europe — this time from Hungary, where a government spokesman raised the prospect of default — set the stock market on edge, as the Dow Jones industrial average plunged 323.31 points, or 3.2 percent. The Standard & Poor’s 500-stock index tumbled 3.4 percent, and the Nasdaq composite slid 3.6 percent. þþCurrency and commodity prices fell in tandem. The euro spiraled downward, dropping below $1.20 for the first time since early 2006. And the price of oil dropped to $71.51 a barrel. þþThe financial world has cast a wary eye at Europe for months, with attention fixed on the southern tier stretching from Greece to Spain and Portugal. But Friday offered a reminder that Eastern Europe was a frail reed, as a spokesman for the Hungarian prime minister said that the previous government had manipulated economic figures and that Hungary was in “a very grave situation.” þþPresident Obama tried to put a gloss on the jobs report, telling workers at a trucking company in Hyattsville, Md., that the numbers showed an economy that was “getting stronger by the day.” Mr. Obama mentioned that Census Bureau hiring accounted for most of the new jobs, but he added that the nation had added jobs for each of the last five months. “These numbers do mean that we are moving in the right direction,” he said. “There are going to be ups and downs.” þþIn fact, the May figures suggested a job market wheezing after months of more vigorous growth. The economy must add more than 100,000 jobs a month just to absorb new workers entering the market. Those entrants — including a large batch of high school and college graduates — will join a labor pool swollen with 15 million Americans looking for work. As well, the report showed that hard-pressed city and state governments had begun to cut budgets and shed employees, a process that could accelerate sharply in coming months. þþ“It’s a very, very grudging labor market,” said Joshua Shapiro, chief economist for MFR Inc. “A growing amount of evidence now points to this recovery taking a long time.” þþSeveral economists expressed concern about the shape of a future constrained by a weakening Europe and slow consumer spending. Robert Reich, who served as labor secretary for President Bill Clinton, placed the chance of the United States slipping back into recession at 50 percent; while his is a minority view, Mr. Reich gave voice to the more bearish take. þþ“The consumers are tapped out, we’ve got a fiscal drag from cities and states which are just beginning to lay off people in great numbers, and most of the buying has been consumers replacing household items — I just don’t see the oomph,” he said, in a view that drew some private assents from within the Obama administration Friday. þþA sliver or three of hope could be found in the report. Manufacturers hired 29,000 workers last month, and both hours worked — 40.5 hours a week — and wages rose. Factory employment has risen steadily, by 126,000 jobs over the last five months, with fabricated metals and machinery particularly strong. þþ“Nothing in this report suggests that the recovery is in trouble — the markets need to get a grip,” said Bernard Baumohl, chief global economist at the Economic Outlook Group in New Jersey. þþGrowing numbers of Americans who had worked part time have found full-time work. And the Census jobs will put money into the pockets of the nation’s hard-pressed working and lower-middle class. As these workers have little margin for error, they will spend these dollars quickly. þ
Source: NY Times
