With global markets already jittery late last week, the last thing they needed was bad news from the world's biggest economy. But that's exactly what they got. The S&P lost 3.4% on Friday as employment figures fell far short of expectations. US non-farm payrolls rose by 431,000 in May, but of these 411,000 were temporary workers hired for the census. These jobs will disappear in a few months. Private employment rose by a mere 41,000.
True, the unemployment rate dipped from 9.9% to 9.7%, but only because the labour force fell as people stopped looking for work. The average duration of unemployment and long-term unemployment (the number of people out of work for at least half a year) hit new records. One in six Americans is under- or unemployed and almost six people are fighting for every vacancy.
This is an "unnervingly jobless" recovery, as Mort Zuckerman of US News & World Report puts it. It also follows an unprecedented decline in payrolls. In a typical cycle the jobs lost would have been made up by now. Instead, we're still 8.4 million jobs short of the 2007 peak. Indeed, overall employment is still below the level reached in early 2000, notes Chartoftheday.com. And the growth of the labour pool usually runs at 100,000 a month.
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Getting back to the peak will take years. Especially since the economy won't have "unsustainable booms in housing and finance" to help the labour market along, says Lex in the FT. The impending fiscal squeeze will be another headwind.
Ominously, the 41,000 rise in private-sector hiring represents a sharp slowdown from March and April. Meanwhile weekly jobless claims rose in May, notes David Rosenberg of Gluskin Sheff. So it looks as though the improvement in the labour market has "stalled". It's another reminder that after a credit bubble bursts, economic recoveries are "fragile and susceptible to periodic setbacks".
The jobs report is "a clear warning that the recovery is very weak", agrees Dean Baker of the Centre for Economic and Policy Research. And with house prices falling again, fiscal cuts looming and trouble in Europe set to dampen exports, "the future is not bright". Moreover, the sharp market slide reported on the news, adds Alan Abelson in Barron's, shows that investors are gradually working out that "their great expectations for the economy are not due to be realised anytime soon".
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