Washington: A weaker-than-expected report on US job creation has shown employers are still reluctant to hire new workers, and has heightened fears of a faltering economic recovery.
In figures that fell well short of expectations -- sending markets across the world plummeting -- the Labor Department said 431,000 posts were created in May, most of them temporary government jobs for this year’s census.
Private-sector jobs rose by just 41,000, less than a fifth of the amount predicted by analysts. Much of that gain came from temporary service-sector jobs.
President Barack Obama’s hopes of slashing US unemployment had been expected to get a substantial boost, amid predictions that 500,000 or more jobs would be created.
But Obama shrugged off the report, saying a slight drop in the unemployment rate showed the economy was getting stronger.
The US unemployment rate dipped to 9.7% from April’s 9.9% as around 322,000 people stopped looking for work.
“This report is a sign that our economy is getting stronger by the day,” Obama told a crowd gathered at a truck dealership in suburban Maryland.
“There are going to be some months where people start worrying that, you know, maybe we’re not out of the hole yet.
“But if we remain determined, if we stick to it, if we stay the course of investing in our people and businesses... then I’m absolutely positive we can succeed.”
But his comments did little to shake fears of a jobless recovery.
“There is no sugarcoating this report as it was disappointing,” said Joel Naroff of Naroff Economic Advisors. “Forget the headline number, the private sector is not out there hiring like crazy.”
That response was echoed on Wall Street where the Dow Jones Industrial Average fell 325 points -- or more than three percent -- shortly before the closing bell.
The picture was equally bleak in Europe. London’s FTSE 100 index shed 1.6% while in Paris the CAC 40 fell 2.9% and in Frankfurt the DAX lost 1.9%.
Analysts said the skittishness was caused by fears that the private sector will not be able to prop up the economy as the government gradually withdraws stimulus spending.
“The softer performance in US private-sector payrolls... raises concern that the recovery is faltering,” Stephen Gallagher and Aneta Markowska of Societe Generale said.
That would spell bad news for the nearly one in 10 American workers who are unemployed and continue to stream into government offices asking for help.
The Labor Department says almost 4.7 million Americans now claim unemployment benefits, with 453,000 new claims in the last week of May alone.
Instead of rehiring staff many firms are asking workers to put in longer hours or are creating only part-time jobs, according to data also released Friday.
The Labor Department said the average workweek has increased by around 20 minutes from a year ago to just over 34 hours.
But some analysts said the employment figures are not yet cause for panic.
“In our view, it would be premature to conclude that the recovery is stalling or even giving way to a renewed recession,” said Jan Hatzius of Goldman Sachs.
“Employment is growing, but so far it is only growing at a 100,000 to 150,000 pace. This is sufficient to keep the unemployment rate stable and absorb most of the new entrants into the labor force, but it is nowhere near the 300,000+ pace which would be required to push the unemployment rate down rapidly.”