Weak U.S. Hiring Adds to Global Gloom

By SHAILA DEWAN

Published: June 1, 2012 - New York Times

The payroll growth, which came in at less than half what analysts had expected and was the lowest number of net jobs created in a year, was potentially devastating for President Obama as he faces re-election. It also put increased pressure on the Federal Reserve to expand its stimulus campaign.

As the third disappointing performance by the job market in three months, for many it served as confirmation that the economic recovery has once again lost momentum.

Global financial markets, already weak in early trading on Friday, sank further on the numbers. On Wall Street, the Dow Jones industrial average lost 1.2 percent, or 145 points, in early trading, and the main index of the German stock market fell 3.1 percent.

At the same time, yields on United States and German government bonds also slumped further as traders sought safer investments. The 10-year Treasury yield fell to another record, 1.46 percent, and the German tw0-year bond fell below zero.

Republicans immediately seized upon the jobs numbers as an opportunity to criticize Mr. Obama’s economic policies.

“The American people don’t have to accept President Obama’s new normal of fewer jobs and higher prices,” House Speaker John A. Boehner said in a statement.

The Labor Department also revised downward April’s gain in jobs, estimated last month at 115,000, to an increase of 77,000.

“In February or March, I thought the labor market had achieved escape velocity,” said Patrick J. O’Keefe, the director of economic research at J. H. Cohn, a consulting firm. “It appears to me now that that was a premature call.”

Several members of the Federal Reserve’s policy making committee have said in recent days that they were not inclined to change current policy, but that position has always been contingent on continued growth.

The economy needs to grow by about 125,000 jobs each month just to maintain the current unemployment rate. When the Fed committee next meets, in late June, it will face the possibility that the economic recovery once again has failed to establish its own momentum.

The report released Friday follows a host of worrying economic data. Consumer confidence, as measured by one of two major indexes, has fallen, and factory surveys indicated that new orders had slowed significantly. New claims for unemployment benefits have ticked up. On Thursday, the estimate for overall growth in the first three months of 2012 was revised downward, to a 1.9 percent annual rate from 2.2 percent.

On the other hand, there have been bright spots, like the auto industry, where sales have been booming. Another measure of the labor market, the employment-population ratio, which takes into account all working-age people whether they are looking for jobs or not, ticked up.

With the latest slowdown, the economy is following a pattern it has established over the last couple of years, of strong winter growth and then a spring or summer slump. “This is definitely a movie we’ve seen before,” Mr. O’Keefe said.

Ellen Zentner, the senior United States economist for Nomura, the financial services firm, credited the poor showing to increased anxiety about Europe’s troubles, not to mention waning growth in China and, to a lesser extent, India.

“Manufacturers are very concerned about Europe because a blowup in Europe means a global slowdown,” she said. “It hasn’t translated into layoffs — businesses are just hiring less.”

But Ms. Zentner added that the recovery’s roller-coaster trajectory may be largely illusory, the product of seasonal adjustment distortions and, this year, the unusually warm winter. While many economists say the weather impact, which caused some growth to occur earlier in the year than it otherwise would have, should be over by now, Ms. Zentner said her research showed that historically, May is the month that is most dampened after a warm winter. Seasonal adjustments were also making the winter look better than it was and the spring look worse.

“What the seasonal bias has done is it’s made the recovery look like a stop-start recovery,” Ms. Zentner said. “Instead, the pace of the recovery has been very steady — very moderate, and disappointing, but steady.”

The number of long-term unemployed, those who have been looking for more than half a year, rose by 300,000, even as hundreds of thousands of them lost their unemployment checks as federally funded extensions ended. The long-term unemployed have the hardest time finding jobs, and many of them say they have not seen any improvement in the job market.

“Nobody has lists and lists of hundreds of available jobs,” said Glen Barry of Carmel, N.Y., who worked for the government at the county level for 25 years as a computer operator and was laid off in December 2010. “A lot of people work a job and a half now. Instead of having four people doing the work, they have two people doing the work.”