Yesterday’s disappointing news on the pace of private-sector job creation sent the stock market tumbling. The S&P 500 lost more than 3.4% on the day and capital flowed into Treasuries, pushing the yield on the 10-year down to 3.2%. The risk-aversion trade is alive and kicking…again. That didn’t stop President Obama from declaring on Friday that “the economy is getting stronger by the day.” Mr. Market thought otherwise. But all’s not lost, explained one dismal scientist, who argues that the crowd simply needs an attitude adjustment. “Nothing in [the May employment report] suggests that the recovery is in trouble — the markets need to get a grip,” Bernard Baumohl, chief global economist at the Economic Outlook Group, said via The New York Times. Nonetheless, optimism is in short supply in the wake of the latest labor market update. Here’s a sampling of the chatter on the jobs front from various corners of the punditocracy…
“The May numbers are now a sobering reminder of the depth and severity of the labor market decline of the past two years and the lingering obstacles to growth,” said Sophia Koropeckyj at Moody’s Economy.com.
While today’s jobs report shows gains, it’s a significant setback following four consecutive months of accelerating growth. The private sector added only 41,000 jobs, as May’s employment increase was driven by temporary Census hiring. Continued slower growth would mean we’ve passed an unprecedented early peak in the rate of employment growth following a recession, which wouldn’t be good news for the recovery’s strength. Manufacturing jobs gains are at best tepid, and a lack of significant growth in construction, financial services, and information show several sectors aren’t yet on the recovery path.
Statement from Bart van Ark, chief economist of The Conference Board
“We’re in a slow and steady jobs recovery, emphasis on slow,” said Harry Griendling, chief executive of DoubleStar Inc., a West Chester employment consultant. “None of this is surprising, and I don’t understand why the stock market reacts like it did today. I think it’s emotional.”
“We do not yet have the makings of a double-dip [recession],” economist Nigel Gault wrote Friday in an analysis for IHS Global Insight of Lexington, Mass. “We still believe that private sector job creation will gradually improve over the rest of the year.”
Christian Science Monitor
It is time to stop searching for the right letter to describe the recovery. It isn’t a V and it won’t be a W, it is a hyphen – flat, low growth indicative of an economy in the process of deleveraging. There is no other interpretation for an add of only 41,000 private jobs plus the downward revision to the April jobs numbers. The median number of weeks out of work climbed to record 23 weeks and of those unemployed 46% have been out of work for more than 26 weeks. And the data from Labor is that much more suspect – in the worst recession since the 1930s the birth/death add in the 12 months ending in May added 427,000 jobs against a reported decline of 831,000 jobs. Without the adjustment the number of jobs lost would have been 51% bigger. The percent of firms surveyed that are hiring plus one-half of those standing still dropped to 54.1% from 66.7% last month. Judging from still elevated jobless claims, the slowdown in new job listings posted on the internet, and the fading impact of government stimulus, it is difficult to see how job growth strengthens from here in a politically acceptable time frame to the levels that cut into unemployment.
Steve Blitz Morning Notes
Today’s jobs report shows a labor market that has turned the corner and is creating jobs but one with a long way to go toward a full recovery from the devastating job losses of 2008-09. The percentage of the population with a job is generally moving in the right direction but remains at a very depressed level. Unemployment is still very high, and jobs are still hard to find. Under these circumstances, policymakers should have no qualms about passing a robust jobs bill — indeed, they would be derelict not to. Unemployed workers struggling to find a job need the help, and based on current forecasts of relatively weak economic growth for the rest of the year, the economic recovery could really use an additional boost.
Statement from Chad Stone, chief economist, Center on Budget and Policy Priorities