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Weak job growth feeds concerns of slowdown

Employers do little more than keep pace with the growth of the workforce, leaving the economy vulnerable to high oil prices, problems with European debt and other financial shocks.

May 05, 2012|By Don Lee, Los Angeles Times
  • A man takes a break at a job fair in New York. The unemployment rate inched down to 8.1% because more discouraged workers dropped out of the labor market.
A man takes a break at a job fair in New York. The unemployment rate inched… (Spencer Platt, Getty Images )

WASHINGTON — The nation's long, hard ride to recovery went off track in the spring: Job growth slowed for the second straight month, raising fresh fears about the underlying strength of the economy.

In a disappointing development for President Obama's reelection campaign, employers added a modest 115,000 jobs in April, barely enough to keep up with the natural growth of the workforce. The unemployment rate inched down to 8.1% — not because more people got jobs but because more discouraged workers dropped out of the labor market.

"They've given up looking for work because they don't think there are jobs for them," said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. "That's a very bad sign."

Overall, the picture that emerges is of an economy that isn't tipping into recession but is expanding at such a frustratingly slow pace that it remains highly vulnerable to shocks. Among those shocks are high oil prices, the problems in debt-strained Europe and a slowdown in the Chinese economy.

The April jobs report, issued by the Labor Department, was eagerly anticipated by policymakers and analysts seeking clues about the economy's direction. Job growth in March had slowed sharply, after three winter months of gains averaging a solid 252,000 jobs. Some analysts were hoping the report would show that the nearly 3-year-old recovery might be heading into a new phase of more robust hiring and growth.

Instead, the report fed concerns that the economy, after showing some muscle in the winter, is now afflicted by a spring malaise, as has been the case for each of the last two years.

"The details of this report are disconcerting," said Patrick O'Keefe, economic research director at J.H. Cohn, an accounting and advisory firm in New Jersey. Apart from a rebound in retail and temporary-help jobs, almost all of the other industries showed weaker hiring activity. Government payrolls fell back again. Workers' earnings hardly budged and employees' weekly hours of work were flat. "It's just an across-the-board deceleration," he said.

The report provoked strong reactions from investors and presidential candidates. Financial markets in the U.S. and Europe skidded, with the Dow Jones industrial average ending down 1.3% to close at 13,038.

For investors, the latest jobs report was in some ways the worst of both worlds. Job growth decelerated enough to raise worries about the economy but not enough to push the Federal Reserve to provide more monetary stimulus, said Neil Dutta, an economist at Bank of America/Merrill Lynch.

Mitt Romney, the presumptive Republican presidential nominee, called the report "terrible and very disappointing," arguing that the economy should be creating 500,000 jobs a month after such a deep recession. "The president's policies have simply not worked," he said in an interview with "Fox & Friends."

Obama sought, as he has in the past, to stress the longer term, emphasizing the improvement from the depths of the downturn while reiterating that more work remains.

"After the worst economic crisis since the Great Depression, our businesses have now created more than 4.2 million new jobs over the last 26 months, more than 1 million jobs in the last six months alone," he said in a speech Friday at Washington-Lee High School in Arlington, Va.

Because of weather, analysts said, the job-growth slowdown in April and March probably overstated the actual deterioration. The mild winter, they said, artificially inflated payrolls in December, January and February; some of those gains cut into future hiring. Construction firms, for example, had a hiring spurt in December and January but haven't seen an increase in jobs since.

The U.S. economy grew at a moderate 2.2% annual rate in the first quarter, helped by a surge in consumer spending and improvement in the long-depressed housing market. Car sales have been strong, and demand for credit has been growing. But the weak jobs report is likely to hurt confidence, prompting consumers to pull back spending and already cautious businesses to delay hiring and investment decisions.

Other analysts, citing the distortions caused by the warm winter weather, said they expected job growth to rise again to 175,000 to 200,000 in the coming months — a pickup from the average job growth of 153,000 a month last year. But even that wouldn't be anything to write home about, said Heidi Shierholz, an economist at the Economic Policy Institute, who worries about the fresh crop of college graduates who will soon be entering the job market.

"Their prospects are better than for the class of 2011, but not by much," she said. "It's still very grim."

Among the few bright spots in April's report, manufacturing continued to perform well. Factory payrolls rose by 16,000 jobs last month, most of them at metal and machinery shops, although that was down from an average increase of 41,000 in each of the preceding three months.

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