US records dismal job growth
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COLUMBUS, Ind. — The U.S. economy suddenly looks a lot weaker.
Only 69,000 jobs were added in May, the fewest in a year, and the unemployment rate rose from 8.1 percent to 8.2 percent.
An analyst for Columbus-based Kirr Marbach & Co. said, however, that the U.S. economy will continue to recover — but not in a straight line.
And a spokeswoman for Cummins Inc., the city’s largest employer, said that the company remains confident in its ability to increase sales.
The dismal national jobs data will heighten fears that the economy is sputtering. It also puts President Barack Obama on the defensive five months before his re-election bid.
The Labor Department also said Friday that the economy added far fewer jobs in the previous two months than first thought — 11,000 fewer in March and 38,000 fewer in April. And the increase in unemployment was the first in 11 months.
Federal data contrast sharply with the latest local data. Bartholomew County’s unemployment rate in April dropped to 5.7 percent. Employment reached an all-time high. Compared to a April 2011, the Columbus metro area had added jobs at a faster clip than any metro in the nation.
Job creation is the fuel for the nation’s economic growth. When more people have jobs, more consumers have money to spend — and consumer spending drives about 70 of the economy.
“The U.S. economy has clearly hit a speed bump over the last month or so,” Rich Hummel, director of research at Kirr, Marbach, said via email.
Hummel said the Federal Reserve likely will take additional steps to make money available to offset the “fear-induced hoarding of cash.”
“Fear, like greed, is a very difficult thing to overcome at times,” Hummel said.
While Europe, which is in recession, poses some risk, Hummel said growth in China, Russia, India and Brazil remains solid.
“An important question, and yet truly unanswered one,” Hummel said, “is will the rest of world growth be able to offset the European slowdown?”
“I believe the US economy will continue to recover although it will be bumpy,” he said.
Janet Williams, director of corporate communications for Cummins, said that the company for years has made sure that it sells a wide variety of products in a wide variety of geographic locations to minimize the impact of a downturn in any one region.
In good and bad economic times, Cummins analyzes conditions around the world to prepare and react to market swings, Williams said.
The company remains “confident in our ability to continue to grow,” she said.
A sharply divided Congress could end up being a job killer. Unless lawmakers intervene by the end of the year, income tax cuts will expire and $100 billion in spending cuts will kick in.
The Congressional Budget Office estimates that would cause the economy to shrink in the first half of 2013. That would meet the traditional definition of a recession: when the economy shrinks for two consecutive quarters.
The conventional wisdom is that at the last minute, lawmakers will prevent the country from falling off the so-called fiscal cliff. But until they do, economists say many businesses will remain reluctant to hire.
A slowdown in hiring hurts even those who do have jobs because employers have less incentive to give raises.
That trend continued in May. The average hourly wage rose just two pennies, to $23.41.
Pay has risen 1.7 percent in the past year. That’s the smallest 12-month gain since December 2010.
It’s even slower than the rate of inflation, which means many people can afford to buy less on what they are earning.
When Michael Eberstadt opened his New York City soul food restaurant in 2007, he had a staff of about 25.
“That was right before the world ended,” said Eberstadt, owner of Rack & Soul, referring to the recession that began in December that year. He’s since shrunk his staff to about 15.
“Hiring is really a function of demand,” he said. “Unfortunately, if the demand isn’t there, then you don’t need to hire.”
Eberstadt said his restaurant was “hit hard and never really recovered” from the recession.
Last year, the top 500 restaurant chains reported sales growth of just 3.5 percent, according to the food industry researcher Technomic Inc.
Still, Eberstadt is relieved he hasn’t had to lay anybody off recently. His payroll has held steady for the past year.
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