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Recovery Doubted Due to Weak Employment Numbers

US Employment Jobs

Economic momentum has experienced a slowdown with weak consumer spending and slow manufacturing data.

Hiring slowed down in May with only a 9.1% rise in employment indicating a slower economic recovery. Last month, nonfarm payrolls rose 54,000. Growth is also constrained by supply disruption after Japan’s disasters. Still analysts believe the economy will not head back into a recession as high gasoline prices are believed to be only temporary. The weak report indicated a slowdown in economic momentum affected further by consumer spending and manufacturing data. The hiring report had no clear impact caused by tornadoes and flooding in the Midwest and South said the Labor Department.

The situation along with slow growth abroad affected President Obama whose re-election chances in 2012 could rely on the economy’s state. Obama acknowledged the economy’s sorry state and said healing may take some time. He said there are still some headwinds coming. Lately it’s been high gas prices, then the economic disruptions after Japan’s tragedy.

First quarter spending was hurt by high gasoline prices. Economic growth stayed at a 1.8% annual pace after the 3.1% rate at the end of 2010. Wal-Mart CEO Mike Duke said paycheck cycle has never been more emphasized. The weak hiring prompted the talk that the Federal Reserve may need to stretch its purchasing program due to end this month. However, central bank officials have made it difficult for monetary policy easing. The White House and lawmakers talk about ways to cut U.S. spending while raising the debt limit and the deal is not final in leading the economy on its own. Without progress by mid-July in raising a debt cap of $14.3 trillion, Moody’s may reduce America’s credit rating. House of Representatives Speaker John Boehner said the jobs report shows the White House it’s time to get serious about cutting spending.

U.S. stocks suffered a 5th week of lows and the dollar was at its lowest versus the Swiss franc. Traders may be inclined to believe the economic slowdown will prompt the central bank to maintain interest rates near zero as treasury debt prices and interest rate futures rose. The feed is expected to hold interest rates for the year. Most economists don’t believe there’ll be an increase before the 2nd half of next year. Growth report in services sectors boosted belief that the economy is not about to plunge. Services sector index grew from April’s 52.8 to 54.6 in May, same with employment and orders, said the Institute for Supply Management. Private sector carried the responsibility of job creation but only added 83,000 jobs last month. Government payrolls were down for the 7th month. March job creation was only 39,000 while with private hiring at 175,000, May payrolls were seen to rise 150,000.

Only a very small portion of the 8 million jobs lost in the recession were regained and economists want to see a payroll growth of 300,000 monthly to say progress is being made. There are 13.9 million unemployed in the U.S. April’s unemployment rate was at 9.0%. J.H. Cohn’s Patrick O’Keefe said there was very little in the report that suggested the household sector has any reason to become more confident in the recovery and that in itself does not augur well for a future acceleration.

Private services sector’s employment was up only 80,000 from April’s 213,000. May payrolls were hampered by leisure, hospitality and retail drops. Factory employment contracted -a first since October. But construction was gaining for 4 months. An average work week was held at 34.4 hours and wage inflation was signaled by a 6 cents rise in average hourly earnings.