Unemployment Rate On The Rise, Jobs Cut In May
Economists speculated whether the surge in job growth over the past months was due to warm winter weather, allowing for construction and manufacturing to start earlier than usual and causing spring job growth to stagnate.
Others believe there are other factors involved, such as Europe's financial crises or the housing market:
- The disappointing jobs report "really underscores that the giveback we've seen (in job growth) is more than just a weather-related event," says Diane Swonk, chief economist of Mesirow Financial to USA Today. Swonk particularly worries that government job losses "will continue to be a drag" the rest of the year. She expects average monthly job gains to pick up but only to a pace of 150,000 to 170,000 the rest of the year.
Construction cut 28,000 jobs, the biggest cut in over two years. Jobs were also lost in professional services, hotels, restaurants and leisure industries. About 13,000 government jobs were eliminated.
The number of unemployed Americans increased by 200,000- the biggest increase since November 2010. Another dismal report was the number of longterm unemployed, which increased from 5.1 to 5.4 million and accounted for 42.8 percent of the unemployed.
When factoring in the discouraged workers who want to work but have given up looking for jobs, Fox News reported that the unemployment rate is about 14.8 percent.
And then there's the recent college graduates to account for, said Fox:
- Adding college graduates in low skill positions, like counterwork at Starbucks, and the unemployment rate is likely closer to 18 percent.
- Prospects for lowering those dreadful statistics remain slim. The economy must add 13 million jobs over the next three years—362,000 each month—to bring unemployment down to 6 percent.
Businesses also aren't as confident as earlier this year. According to MSN Money, "Companies have cut their spending on computers and machinery for two straight months, goods that signal investment plans. And some regional surveys suggest the factory activity is expanding at a slower pace."
Consumers share similar feelings, with a survey projecting that Americans will cut back on spending— a factor that pushes 70 percent of economic growth.
Republicans used the report as an indicatation that President Obama's jobs plan is not working.
MSN Money reported:
- "Today's extremely troubling jobs report proves yet again that President Obama's policies simply are not working and that he has failed to live up to the promise of his presidency," said Republican National Committee Chairman Reince Priebus.
- Alan Krueger, chairman of Obama's Council of Economic Advisers, said in a statement: "It is important not to read too much into any one monthly report."
- But Krueger acknowledged: "There is much more work that remains to be done to repair the damage caused by the financial crisis and deep recession that began at the end of 2007."
President Obama had focused on economic recovery in his State of the Union Address in January, making a push for his Jobs Plan, which many believed had helped boost hiring and strengthen his 2012 campaign. In March, the unemployment rate fell to 8.8 percent, the lowest it had been in two years.
Though the unemployment rate is lower since then, the rate isn't dropping fast enough to get it to a healthier level, and trade with China may be playing a significant role in restricting economic growth, according to Peter Morici, an economist and professor at the University of Maryland's Smith School of Business.
Oil and trade with China account for nearly the entire $600 billion trade deficit. Dollars sent abroad that do not return to purchase US exports, are lost purchasing power. Consequently, the U.S. economy is expanding at 2 percent a year instead of the 5 percent pace that is possible after emerging from a deep recession and with such high unemployment.
Without prompt efforts to produce more domestic oil, redress the trade imbalance with China, relax burdensome business regulations, and curb health care mandates and costs, the US economy simply cannot grow and create enough jobs.
In Europe, the financial crisis has dampened the employment outlook as well. Bloomberg reported that the EU's unemployment rate rose to 11 percent- the highest since they began collecting economic data in 1995- with 17.4 million people being unemployed. Spain had the highest unemployment numbers at 24.3 percent, up from 24.1 percent in March. Greece followed with 21.7 percent, up from 15.2 percent since February.
According to Bloomberg:
- “The labor-market recession in the euro zone continues to spread and deepen,” said Martin van Vliet, an economist at ING Bank in Amsterdam. “We currently see the jobless rate peaking at or slightly above 11.5 percent, under the assumption that the euro-zone economy starts to emerge from its double-dip recession later this year.”
- The euro was lower against the dollar for a fourth day, trading at $1.2327 at 10:35 a.m. in London, down 0.3 percent on the day.