“Ouch” is the only word that came to my mind when parsing through the May Employment Report. There were precious few nuggets for the bulls to get excited about and the bears were chomping at the bit as the details came out. As always, let’s discuss the ins and outs of the report to see what it says about the economy.
Unwelcome Weakness
Just as it seemed the labor market might have some momentum, this stinker of a report came out. It showed that employers only added 54,000 jobs in May, much less than the 169,000 positions expected by economists. Of course a poor report was foreshadowed by the bad ADP report that came out two days earlier. Additionally, the unemployment rate rose a tenth to 9.1%. This was also expected to fall.
As always, the revisions to prior reports are almost as important to look at than the current report itself. The news here is not good either. March and April’s numbers were revised lower by a combined 39,000 jobs. This reverses a recent trend in which previous months’ numbers were consistently being revised upwards.
The average duration of unemployment also rose to 39.7 months from 38.3 months in April. This is an under-reported statistic that has major social as well as economic implications. Long spells of unemployment can cause mental stress as well as family problems. Additionally, these workers are more likely to become “discouraged” and drop out of the labor force altogether.
This report is even worse when taken in the context of other economic reports. They have almost all been universally poor, which shows the economy is going through a significant “soft” patch. There are those pounding the table that we are heading for a double-dip recession, especially since the Fed will be ending its QE2 program at the end of this month. Add all of this together and it’s easy to see why the market has been selling off lately.
Politically, this is a nightmare scenario for President Obama, but I’m not sure that he can really do much about this at this time. I have never been a big advocate of the position that the president can control the level of employment and economic growth. It is simply something that he takes credit or gets blamed for. For his sake and the millions of unemployed, I hope May’s report was an aberration.
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