Today in Business: Jobs Report Disappoints

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The government reported that 431,000 jobs were created in May, but most of those were temporary census employees. While the positive numbers marked the fifth month in a row of jobs created versus lost, the number of private sector jobs fell far below what economists had expected.

Disappointed investors pushed U.S. stock markets down more than one percent in morning trading. 

“There is no sugar coating this report as it was disappointing,” said Joel Naroff, chief economist with Naroff Economic Advisors. “The private sector has not become a jobs producing machine.”

The Bureau of Labor Statistics American said private employers hired only 41,000 jobs while the Census hired 411,000. 

For the year, an average of 192,000 jobs has been created each month.  Compare that to the same period a year ago when the economy was losing an average of 634,600 jobs each month.

“The recovery is tracking close to the pattern of hiring that we saw during the ‘jobless’ recoveries of 1991 and 2001, which means that we still have a long way to go before we recoup the jobs that were actually lost during the recession,” said Diane Swonk, chief economist with Mesirow Financial.

In separate survey, the government reported that the nation’s unemployment rate fell to 9.7 percent. The decline was due in part to a drop in the number of people actually looking for work, the requirement for being considered unemployed.

Currently, there are 15 million Americans looking for work in May who could not find a job. Of those looking for work, nearly half (46 percent) have been looking for work for more than six months.

The broader measure of unemployment – one that includes people who worked part-time work when they hoped for full-time work and those too discouraged to even look for a job –  the unemployment rates was 16.6 percent, a slight decrease from the previous month.

“The challenge for June and July will be to absorb new grads into the labor force, as those who have been unemployed for a long time rejoin the labor force,” said Swonk.

There were some positive trends in the report. The number of temporary workers increased again by 31,000 jobs.  Many employers bring on temporary workers before hiring full-time employees. In addition, the average work week increased slightly to 34.2 hours and pay rose 0.3 percent.  Economists consider these as signs that employers are having employees work more and could indicate they have enough business to possibly hire in the future.

So, where were jobs created and lost?

•        Manufacturers (+29K) continued to increase, perhaps indicated more orders for products.  Factory employment has grown by 126,000 jobs this year.

•        Construction firms (-35K) cut workers last month.

•        Retail, financial services, leisure and hospitality was flat in May compared to April

•        A consistent bright spot, health care which added 8,000 jobs.  In the past year, nearly 20,000 jobs have been created each month. 

•        And the federal government which hired 390,000 workers in May, largely Census 2010 part-time employees.

The next jobs report is scheduled to be released on July 2th.