US recovery stalls as unemployment rate rises amid dismal job growth

Dominic Rushe in New York

guardian.co.uk, Friday 1 June 2012 14.33 BST

http://www.guardian.co.uk/business/2012/jun/01/us-recovery-unemployment-rate-rises

The recovery in the US jobs market hit a wall in May as the economy added a paltry 69,000 jobs and the unemployment rate rose to 8.2%, the first rise in nine months.

May's figures are the third set of disappointing numbers but the latest report from the labour department contained more worrying news. The gain was the smallest in a year. April's gain of 115,000 jobs was revised down to an increase of 77,000.

A broader measure of unemployment, the U6, rose to 14.8% in May from 14.5% in April. The U6 takes into account job seekers as well as those working part-time who want to work full-time jobs.

The White House moved swiftly to dampen the political fallout of the report, which will provide ammunition for Republican presidential nominee Mitt Romney, who is attacking President Barack Obama's economic policies ahead of this November's election.

Alan B Krueger, chairman of the Council of Economic Advisers, said: "Problems in the job market were long in the making and will not be solved overnight. The economy lost jobs for 25 straight months beginning in February 2008, and over 8m jobs were lost as a result of the Great Recession. We are still fighting back from the worst economic crisis since the Great Depression."

He said the US economy faced "serious headwinds, including the crisis in Europe and a spike in gas prices" but it was important not to read too much into one month's figures.

Betsey Stevenson, professor of business and public policy at Wharton business school, said: "This is a very bad report. It changes where I thought the US economy was."

She said the cuts to April's job figures were particularly worrying, pointing to a slowdown in the US recovery. The number of long-term unemployed rose to 5.4m from 5.1m, another worrying sign of weakness, said Stevenson.

Gus Faucher, senior economist of PNC Financial Services, said he had been shocked by the numbers. "They were much worse than we had expected. There was a big drop in construction [down 28,000 in May] which is worrying, wage growth was weak. It is hard to see anything good in this report," he said.

The news comes after other economic reports have pointed to a slow down in the US recovery. Yesterday the commerce department said the US's gross domestic product (GDP) – the broadest measure of economic growth – rose just 1.9% in the first quarter, down from an estimated 2.2% and far slower than the 3% reported in the fourth quarter of last year.

That figure came as the labour department announced that first-time claims for unemployment insurance payments had increased by 10,000 to 383,000 in the week ended 26 May.

Those figures came as the latest monthly survey by ADP Employer Services reported private employers had added 133,000 in May, economists had been predicting 150,000.

The US jobs market is at least recovering.

In Europe there were 17.4 million people without jobs in the 17 nations that use the euro in April, an increase of 110,000 since March and 1.8 million higher than a year earlier, European Union statistics agency Eurostat said Friday. The bloc's unemployment rate is 11%.

If you have questions about the unemployment rate, jobs numbers and the US economic outlook, Dominic Rushe will be answering questions in the story comments beginning at noon ET today.