WASHINGTON — Employers added only 41,000 private-sector jobs in May, the government reported Friday in a disappointing employment report that fell short of expectations on Wall Street, sent stocks skidding and raised questions about the strength of the economic recovery.
“This is a disappointing report on the job market. Only 41,000 private-sector jobs were created in May, and close to 100,000 on average since job growth resumed at the start of the year,” said Mark Zandi, the chief economist for forecaster Moody’s Analytics. “The economy needs closer to 150,000 in monthly job gains to stabilize the unemployment rate.”
In all, the economy added 431,000 jobs in May, making it the fifth consecutive month of job growth, and the nation’s unemployment rate fell to 9.7 percent from 9.9 percent.
However, 390,000 of the new jobs — more than 90 percent — were in government, and most of them were temporary positions to help conduct the 2010 census.
The private-sector job gains were limited mostly to the health care, mining and manufacturing sectors, and what had been a return to construction hiring proved short-lived as the sector shed jobs again.
While federal employment was up sharply because of the temporary hiring, state and local governments shed 22,000 jobs in May, and that may be a preview of things to come.
“The largest weight on the job market is the mounting layoffs at state and local governments that are under severe budgetary pressures,” Zandi said.
Private-sector hiring, which exceeded 218,000 jobs in April, fell dramatically in May, and the recent stock-market slump seems to reflect a growing view that the U.S. economy, while improving, won’t grow fast enough this year to knock down the jobless rate and move sharply into an expansion phase.
Speaking at a truck plant in Maryland on Friday morning, President Barack Obama tried to put a good face on a disappointing report.
“This is the fifth month in a row when you see job gains,” Obama said to applause from workers, while warning that economic recovery remains in the early stages. “This report is a sign that our economy is getting stronger by the day. . . . This doesn’t mean that the recession is over for millions of Americans who are out of work.”
Cautioning that ups and downs are expected for months, the president repeated that the recovery is “moving in the right direction.”
May's weak private-sector hiring was unexpected. On Wednesday, Treasury Secretary Timothy Geithner had touted the improving outlook. "We’re seeing the private sector start to create jobs again on a significant scale," he said.
The jobless rate is expected to go back up over 10 percent later this year as the economic recovery convinces more Americans to resume looking for work and be counted as unemployed rather than out of the work force.
Despite their disappointing totals, Friday's numbers confirmed an improving trend that includes recent gains in consumer confidence, auto sales, retail sales, manufacturing and services.
Other nuggets of good news were buried in the employment report: Temp hiring continued in the private sector, an indicator of future full-time hiring. Average hours worked per week also increased in May, putting more money in the pockets of the employed.
"Hours worked are a good leading indicator of future job creation, and the job market will slowly gain traction in coming months," Zandi said. "The bottom line is that businesses remain cautious about adding to payrolls. They should become more emboldened in coming months, given their better profits and stronger balance sheets, but … it's premature to conclude that the economic coast is clear."
For that, employers must keep hiring.
"The key to a self-sustaining expansion is going to be private-sector expansion," said Robert Dye, a senior economist with PNC Financial Services Group in Pittsburgh. "Generally speaking, the whole bag of indicators is consistent with our expectation of what we've been calling a moderate or half-speed recovery. Because it's less than a full-swing recovery, there are vulnerabilities to downside risks."
Chief among those risks is the growing debt crisis in Europe, which has sent the euro, the currency that 16 European nations use, sinking against the dollar. That drives up the cost of U.S. exports, which have been helping to power the U.S. recovery.
The worse-than-anticipated report Friday will make nervous markets watch next month’s report even more closely for signs of strength or weakness in the economy.
“Continued slower growth would mean we’ve passed an unprecedentedly early peak in the rate of employment growth following a recession, which wouldn’t be good news for the recovery’s strength,” Bart van Ark, the chief economist for the Conference Board, a business research center, said in a statement. “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.”
In one more troubling sign, the number of long-term unemployed reached another record level in May. Of the 15 million unemployed Americans, 6.8 million of them now have been jobless for half a year or more. In other words, nearly 46 percent, or almost half of all Americans who’ve lost their jobs, have been unemployed for more than 26 weeks.
The AARP, the influential lobby for seniors, issued an analysis Friday morning that showed that in May some 59.4 percent of unemployed workers older than 55 had been jobless for longer than six months. That was up sharply from 56.8 percent in April.
MAY BY THE NUMBERS
- Construction, down 35,000.
ON THE WEB
MORE FROM MCCLATCHY