In a troubling sign of a weakening economy, the Department of Labor reported on Friday that the US added just 69,000 jobs in May, about half of what Wall Street had been expecting. At the same time, the unemployment rate edged higher to 8.2 percent, up from 8.1 percent in April.
The low jobs total was the third consecutive month of disappointing jobs numbers. Initially, economists believed that companies had over-hired during the warm winter and had slowed hiring in the spring. Now, they say the economic downturn in Europe may be having an effect here, as banks become more skittish about making loans. At the same time, another barometer of confidence – the stock market – fell 6 percent in May.
Poor unemployment report points to troubled US economy
Of course, we've seen worse, even in this Administration, but it's still a bit of a letdown for all those folks who thought that if we just stop spending everything will be alright. At least, it would be if anyone who thinks the key to solving this economic mess lies in not spending money had any idea how embarrassed he should be.
As for the ideas proffered in that Christian Science Monitor article for what explains the slowdown, I think that none of them make much sense. Europe isn't that big a trading partner, and while there are dark clouds on the financial horizon there, things haven't collapsed yet. As for the bit about overoptimistic hiring, well maybe. We had a better Christmas shopping season last year than in the two or three previous, so that might have engendered a bit of optimism. Beyond that, though, I'm not buying it.
The thing I don't see talked about is that the effects of the stimulus bill have about run out. As I predicted back then (along with a good many people who are actually serious economists) there wasn't enough stimulus to right the economy. The last effect it was going to have ended pretty much in the middle of last year. With that optimistic Christmas, which is normally a big part of the retail sales for a year, we saw some optimism into the early part of this year.
Now we're seeing how the economy is without a stimulus. It's still not in good shape, which is exactly what anyone with any sense predicted.
As usual, Robert Reich sums things up pretty well:
Face it: The jobs recovery has stalled.
What’s going on? Part of the problem is the rest of the world. Europe is in the throes of a debt crisis and spiraling toward recession. China and India are slowing. Developing nations such as Brazil, dependent on exports to China, are feeling the effects and they’re slowing as well. All this takes a toll on U.S. exports.
But a bigger part of the problem is right here in the United States, and it’s clearly on the demand side of the equation. Big companies are still sitting on a huge pile of cash. They won’t invest it in new jobs because American consumers aren’t buying enough to justify the risk and expense of doing so.
The Job Stall
Which, once again, is what anyone with any sense has been predicting for a long time now. That this doesn't include anyone in the press or the Obama Administration is more an indication of what an unrealistic world those people live in than any deficit on the part of the economists who saw this coming.
Afterword: It's at least possible that people will think I don't take Europe's problems seriously, or that I had forgotten what I wrote about them a few months ago. Neither is true. Europe's problems mean two things for the U.S. economy:
- As Europe's economic woes deepen, there will be one less place we can hope to see increased demand for American products, and
- When Europe's financial system goes boom, it will probably take part of ours with it. When you read about Europe's financial woes, names like Mellon, JP Morgan, and Goldman Sachs come up quite often. Those financial companies, among others, stand to lose a lot if Europe goes belly up.
So Europe's woes could well become ours as well, and to a small extent they already are. It's just that I don't see that effect just yet. What I see, like Robert Reich, is mostly the effect of American mismanagement of our own economy.