This week has witnessed some encouraging news on the economic front, but this morning’s update on payrolls will mute any temptation for celebrating.
Indeed, the unemployment rate surged upward to 5.5% last month from 5.0% in April, the Bureau of Labor Statistics reports. The jobless rate is now at its highest since October 2004. And let’s not forget that unemployment reports are the most politically sensitive economic number and that this is a political year. As a result, we expect the echo chamber to ring loud and clear over this report. Prepare yourself for a hefty dose of discouraging chatter about jobs and the economy this weekend and into next week.
Perhaps that’s appropriate, considering that the economy continued to shed jobs in May, as our chart below shows. In every month of 2008 so far, nonfarm payrolls have shrunk.
There’s simply no way to spin the reality that the economy is on the defensive. The pain isn’t necessarily deep or wide, at least not yet. But there’s no denying the trend.
Still, it’s been tempting at times this week to think otherwise. Yesterday’s news that retail sales for May exceeded analysts’ expectations was taken by some as a sign that the worst is behind us. Another potential bright spot was the drop in jobless claims for last week, which surprised economists and inspired some to declare that the economy was finally on the mend.