By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — The U.S. economy in May generated the fewest number of new jobs in a year and the unemployment rate ticked up, the strongest sign yet that the economy has slowed again after a fast start in early 2012.
The economy added 69,000 jobs in May, far below Wall Street estimates and the smallest increase since May 2011, the Labor Department reported. The number of new jobs created in April and March were also revised lower.
The unemployment rate, meanwhile, edged up to 8.2% from 8.1%, mainly because more people entered the labor force even as hiring slowed.
Economists surveyed by MarketWatch had forecast a 165,000 increase in new jobs and they expected the jobless rate to hold steady at 8.1%.
The disappointing employment report sent U.S. stock futures further into negative territory. The latest data are sure to unnerve investors already worried about the worsening financial picture in Europe, a crisis that has already hit U.S. stock prices hard.
The small increase in jobs also puts further pressure on the Obama administration just six months before the presidential election.
Republicans blame the president’s policies for the slow recovery after the 2007-2009 recession and are using his handling of the economy as their main line of attack.
Hiring has slowed down noticeably after a sharp burst from December to February, when job growth averaged 252,000 a month.
The number of new jobs created in April was slashed to 77,000 from an original estimate of 115,000, while job growth in March was revised down to 143,000 from 154,000.
Economists say unusually warm weather boosted job creation in the winter at the expense of hiring in the early spring.
What remains to be seen is whether hiring picks up again soon, a tricky proposition given the recent string of data suggesting renewed softness in the economy.
Most economists believe the U.S. is on track to add an average of 150,000 to 200,000 jobs a month in 2012, a pace that would more than keep up with population growth.
Yet even faster job creation — at least 250,000 a month for several years — would be required to bring employment back to pre-recession levels. The U.S. has 5 million fewer jobs now than it did five years ago.
At this point, that kind of job growth seems unlikely. The European crisis is unlikely to end soon, and as events of recent days have shown, the situation could get worse before its better. Economists say the ongoing European crisis and slowdown in the Chinese economy may be hurting U.S. exports and undermining the confidence of business executives and consumers. A closely followed index of consumer confidence, for example, fell for the third straight month in May to the lowest level in five months.
U.S. consumers, for their part, have increased spending mainly by dipping into their savings or relying on installment loans. With wages growing slowly, they’ll have to cut back at some point to rebuild their savings, many economists contend.
