The May jobs report disappointed in a major way, showing nonfarm payrolls adding only 69,000 jobs, inching the jobless rate up from 8.1 to 8.2 percent. In addition, the latest report shows that April was much worse for hiring than previously thought, with that month's payrolls figure revised down from 115,000 to 77,000 jobs added. March was also revised down by 11,000, to 143,000. That makes three straight months of anemic growth, especially when compared to earlier this year, when the economy was adding jobs at a rate of well over 200,000 per month.
May's numbers show that construction remained weak, cutting 28,000 jobs, in part reflecting a struggling housing market. In addition, the usually strong professional and business services industry dropped 1,000 jobs—the first time it has lost jobs since early 2010. And government continued to shed workers, losing 13,000 jobs. By the Labor Department's broadest definition of unemployment, the U-6 rate, which includes those who have stopped looking for work and people employed part-time for economic reasons, unemployment jumped from 14.5 to 14.8 percent.
And unlike in March and April, it is becoming less and less likely that sluggish job growth can be blamed on a warm winter shifting hiring back a few months.
"The jobs number will need another month to really get clear of some of that going forward. But once we get to June and July's numbers, though, it's going to be pretty hard to convince a lot of economists [and] market watchers that we're pulling forward jobs three or four months into the future." says Brad Sorensen, director of market and sector research at Schwab. "You're not going to pull forward a year's worth of jobs because of the weather."
Numbers in future months could be similarly soft, adds Sorensen. Looking forward, plenty of hurdles remain for hiring, both because of economic turmoil abroad and also because of upcoming battles on Capitol Hill, like another potential debt ceiling fight and the so-called "taxmageddon" coming at the end of the year.
"Really in every industry—manufacturing, service—some of the softness we're seeing can be attributed to the uncertainty we're seeing in the economy, both because of obviously the European situation but even more in the U.S. uncertainty over health care, the tax code, regulatory reform, those kind of things," he says. "You're asking companies to hire workers and put them onto the payrolls and increase their expenses, but they're not sure what their other expenses are going to be."
In addition, the labor force participation rate—the percentage of people working or looking for work—remains depressed, at 63.8 percent. That's up 0.2 percentage points from April, but down from the 66 or 67 percent seen in better times. As the jobless rate is calculated as a percentage of the labor force, a low participation rate means that the unemployment rate is also lower than it might be with more optimistic job seekers.
"Historically, the labor force participation rate was a bit like an accordion; it would contract when there was downward pressure on the demand for workers, but as soon as the economy began to recover, the labor force, both the number and the rate, would rise," says Patrick O'Keefe, director of economic research at accounting and consulting firm J.H. Cohn. "I guess the good news is that statistically our unemployment rate is lower [than it has been], but that's merely a definitional phenomenon."