Unemployment rises to 9.1 percent nationwide

Friday, June 3, 2011 | 8:02 p.m. CDT; updated 11:23 a.m. CDT, Thursday, June 16, 2011

WASHINGTON — Employers in May added the fewest number of jobs in eight months, and the unemployment rate inched up to 9.1 percent. The weakening job market raised concerns about an economy hampered by gas prices and the Japanese nuclear disaster.

The key question is whether the 54,000 jobs added last month mark a temporary setback or are evidence of a more chronic problem. That total is far lower than the previous three months' average of 220,000 new jobs per month.

Private companies hired 83,000 new workers in May — the fewest in nearly a year.

Stocks on Wall Street fell for the third straight day. The Dow Jones industrial average was down 76 points in late-morning trading. Broader indexes also dropped.

Among the deepest job cuts were in local governments, which cut 28,000 jobs last month, the most since November. Nearly 18,000 of those jobs were in education. Cities and counties have cut jobs for 22 straight months and have shed 446,000 positions since September 2008.

The anemic pace of job creation poses a challenge to President Barack Obama's re-election prospects next year. It followed a string of sluggish economic data in the past month that suggest the economy is growing more slowly.

The manufacturing sector, a key driver of the recovery, grew at its slowest pace in 20 months in May. Home prices in big metro areas have reached their lowest level since 2002.

Higher gas prices have left less money for consumers to spend on other purchases. Average wages aren't keeping up with inflation. As a result, consumer spending, which fuels about 70 percent of the economy, is growing sluggishly.

Economists have said that most of the factors slowing the economy are temporary. Some are now concerned that their impact is greater than they first envisioned.

"Economic activity has clearly hit a soft patch," said Steven Wood, chief economist for Insight Economics. "The open question is whether this is temporary and will quickly reverse itself over the next couple of months or whether this is an adjustment to a slower permanent growth rate."

Nariman Behravesh, chief economist at IHS, called it a "pretty bad report. It's tempting to say it's an outlier, but I'm a little worried."

More people entered the work force in May, but most of the new entrants couldn't find work. That pushed the unemployment rate up from 9 percent in April. The number of unemployed rose to 13.9 million.

The government revised the previous months' job totals to show 39,000 fewer jobs were created in March and April than first estimated.

The weakness in hiring was widespread. Manufacturers cut 5,000 jobs, the first job loss in that sector in seven months. They included a drop of 3,400 jobs in the auto sector.

Car makers are cutting back on production because they are having a difficult time buying parts. Many auto parts, including some key electronic components, are made in Japan, and the March 11 earthquake and ensuing nuclear crisis in that country has disrupted supply chains.

Sectors of the economy most dependent on consumer spending suffered some of the steepest job losses in May. Retailers cut 8,500 positions, after adding 64,000 in April.Leisure and hospitality, which includes restaurants and hotels, cut 6,000 jobs, after adding an average of 43,000 in the previous three months.

There were some bright spots in May. Professional and business services added 44,000 positions, most of them in accounting, information technology services and management.

The economy must generate at least 100,000 jobs each month to keep up with population growth and prevent the unemployment rate from rising. Economists say the gains need to be at least double that total to drive down the rate.

About 8.5 million Americans worked part time, even though they would have preferred full-time jobs. An additional 2.2 million have stopped looking in the past year.

When the unemployed are combined with part-time workers who would rather be working full time and people who have given up looking for jobs, roughly 25 million Americans are "underemployed." That's equal to 15.8 percent of the workforce.

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Jeremy Calton June 4, 2011 | 2:36 p.m.

Without the McDonald's hiring, last month's gains would have been close to zero. Nothing against McDonald's, but is every job really worthy of the same "plus 1" as every other job? If unemployment was 0% but all the 300 million of us knew how to do was work in fast food, would that mean we had a great economy?

(Report Comment)
frank christian June 4, 2011 | 5:03 p.m.

j. Calton - Just curious, if a McDonald's job is not worth a whole +1 job, what portion of a whole job should it be? Next, who would decide what portion it is worth? Do I smell a new segment to our Labor Dept., coming?

A worse problem than mentioned above, is the sub-culture of people unemployed for so long that they will never find employment, even after recession is over. We set new records for individual length of time unemployed many months ago. In this sense, those that think we should come 'round to the European, Japanese, way of living are now getting their wish. Living with near double digit unemployment for long periods of time apparently does this to every country.

(Report Comment)

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