May Jobs Report: Hiring Slows Down And Unemployment Rate Goes Up

June 3, 2011

After months of steady job growth, a disappointing May jobs report from the Labor Department suggests that the economy may be running out of steam.

CNN Money reported that the economy grew by a mere 54,000 jobs in May, a drastic difference from the 232,000 jobs that were added in April. Though many braced for a weak report compared to last month, the numbers were shocking--according to The Wall Street Journal, economists were expecting an increase of 160,000 jobs and thought the unemployment rate would fall back down to 8.9 percent. Instead, the jobless rate edged up again last month to 9.1 percent.

"It is pretty clear that the economy ran into a brick wall last month," said Paul Ashworth, chief U.S. economist for Capital Economics, in a research note quoted by CNN Money.

The private sector added 83,000 jobs last month, which was far less than what economists were expecting and the weakest hiring level in 11 months. Public sector employers, on the other hand, continued to cut jobs--29,000 workers were cut in May, most of which were from local governments. Teachers and municipal workers also lost jobs as a result of budget cuts. In the last six months, state and local governments have eliminated 175,000 jobs.

Manufacturers, who some economists have said is the economy's saving grace, cut jobs for the first time since October. The auto industry also suffered from supply disruptions caused by the Japanese earthquake and tsunami. Furthermore, the rising costs of gas, food and other commodities have caused consumers to spend less, which is taking a toll on the economy.

While some experts worry that May's jobs report could cause employers to pull back on hiring plans, others remain optimistic.

"There are always ebbs and flows to the jobs market. One month does not a trend make. This comes on the back of three strong months of jobs growth," said Scot Melland, CEO of Dice Holdings, a provider of career Web sites.

Moreover, The New York Times pointed out that the results of natural disasters in Japan and unrest in the Middle East are temporary factors, so economists still have faith that the troubles will pass.

Though the Labor Department's report was clearly a disappointment, many economists hope that it will force Washington policy makers to reprioritize. In recent months, the fiscal deficit has stolen the spotlight.

"My fervent hope is that this shocks policy makers into realizing the most urgent problem in front of us right now is jobs," said Heather Boushey, a senior economist at the Center for American Progress.

Compiled by Heidi M. Agustin