Jobless rates jumps to 5.5 percent -- biggest rise since `86

[RunInRed 16,492]

Hate to be the bearer of bad news but I'm sure Otter will cheer us all up shortly...

AP

Jobless rates jumps to 5.5 percent -- biggest rise since `86

Friday June 6, 10:30 am ET

By Jeannine Aversa, AP Economics Writer

Unemployment rate jumps to 5.5 percent in May, biggest rise since 1986; payrolls cut again

WASHINGTON (AP) -- The nation's unemployment rate jumped to 5.5 percent in May -- the biggest monthly rise since 1986 -- as nervous employers cut 49,000 jobs.

The latest snapshot of business conditions showed a deeply troubled economy, with dwindling job opportunities in a time of continuing hardship in the housing, credit and financial sectors

"It was ugly," said Richard Yamarone, economist at Argus Research.

With employers worried about a sharp slowdown and their own prospects, they clamped down on hiring in May, said Friday's report from the Labor Department. The unemployment rate soared from 5 percent in April to 5.5 percent in May. That was the biggest one-month jump in the rate since February 1986. The increase left the jobless rate at its highest since October 2004.

On Wall Street, stocks slid. The Dow Jones industrials tumbled more than 200 points in morning trading.

The big jump in the unemployment rate surprised economists who were forecasting a tick-up to 5.1 percent. Payroll losses, however, weren't as deep as the 60,000 that analysts were bracing for. Still, job losses in both March and April turned out to be larger than the government previously reported. Employers now have cut payrolls for five straight months.

The White House expressed disappointment, too.

"Certainly this isn't a report that we wanted to see today," White House deputy press secretary Scott Stanzel said. He acknowledged that the increase was higher than experts expected. "It is a number that is too high in our view but it is lower than the average of the last three decades."

The 5.5 percent rate is relatively moderate judged by historical standards. Yet, there was no question that employers last month sharply cut jobs in manufacturing, construction, retailing and professional and businesses services. Those losses swamped gains elsewhere, including in the education and health fields, government and leisure and hospitality.

The government said the number of unemployed people grew by 861,000 in May -- rising to 8.5 million. The over-the-month jump in unemployment reflected more workers losing their jobs as well as an increase in those coming into the job market -- especially younger people -- to look for work, the Bureau of Labor Statistics said.

A year ago, the number of unemployed stood at 6.9 million and the jobless rate was 4.5 percent.

A trio of crises -- housing, credit and financial -- have rocked the economy. That's caused economic growth to slow to a crawl as businesses and consumers have tightened their belts. Spiraling energy costs are another negative force.

The country's economic problems are a top concern for voters -- and thus for President Bush, lawmakers on Capitol Hill and those vying to win the White House this fall.

And, there's been a lot of talk about whether the economy is on the brink of, or fallen into, its first recession since 2001. That determination, made by a panel of academics, is usually made well after the fact.

"For the average American there is not debate that the eocnomy is in a recession," said Mark Zandi, chief economist at Moody's Economy.com. "That's because their net worth is lower, their purchasing power is lower and it is tough to find a job. If you lose a job, it is tough to get back in," he said.

So far this year, the government said, job losses have totaled 324,000.

Workers with jobs, however, saw modest gains.

Average hourly earnings for jobholders rose to $17.94 in May, up 0.3 percent from the previous month. Economists were forecasting a 0.2 percent gain. Over the last 12 months, wages have grown by 3.5 percent..

With food and energy prices marching upward, paychecks aren't stretching as far. Although tax rebates helped to energize shoppers and give major retailers better sales in May, analysts still believe that anxious consumers will be keeping a close watch on their purchases and their budgets in the months ahead. A weakening job market could make people feel less inclined to spend.

Worried about inflation, Federal Reserve Chairman Ben Bernanke has signaled that the central bank's rate-cutting campaign, which commenced last September to help bolster the economy, is probably over for now.

Fed officials and the Bush administration are hoping that the Fed's powerful doses of rate reductions and the government's $168 billion stimulus package, including tax rebates for people and tax breaks for businesses, will pull the economy out of its deep funk in the second half of this year.

Even if that happens, the unemployment rate is expected to climb to 6 percent or higher early next year. Employers won't want to ramp up hiring until they feel more sure that an economic recovery has strong legs.

http://biz.yahoo.com/ap/080606/economy.html

[TitanTiger 20,511]

For Clinton's term, he had an average unemployment rate of 5.204 and Bush has had one of 5.185. And Clinton inherited an economy that was coming out of a recession while Bush inherited one that was going into one. So on balance, if Bush has done a rotten job on our economy, then so did Clinton but I never hear a Dem put it that way. No matter how you slice it, we've had some historically low unemployment rates and even increasing to 5.5% isn't cause for panic.

[otterinbham 0]

Well, I realize that you don't know how to argue economics, but no point in calling me out. And, as I said in a previous post, unemployment is always a trailing indicator, not a leading one.

[RunInRed 16,492]

For Clinton's term, he had an average unemployment rate of 5.204 and Bush has had one of 5.185. And Clinton inherited an economy that was coming out of a recession while Bush inherited one that was going into one. So on balance, if Bush has done a rotten job on our economy, then so did Clinton but I never hear a Dem put it that way. No matter how you slice it, we've had some historically low unemployment rates and even increasing to 5.5% isn't cause for panic.

I'm not convinced. And here is why:

New jobs created under Clinton: 22.4M

New jobs created under Bush: (Who wants to fill in the blank?)

Just 1.5 million private sector jobs have been created during the Bush presidency, compared with over 20 million private sector jobs during the Clinton presidency. (Joint Economic Committee Democrats, 7/7/06)

The manufacturing sector, often the source of jobs with good pay and benefits, has lost 2.9 million jobs since the start of the Bush Administration. This slow pace of private sector job creation is particularly troubling given that we are so far into the economic recovery. (Joint Economic Committee Democrats, 7/7/06)

Here's the rate of job growth for the administrations since 1960:

Kennedy-Johnson 3.27%

Nixon-Ford 4.93%

Carter 3.06%

Reagan 2.06%

Bush I 0.60%

Clinton 2.38%

Bush II 0.59%

link

[RunInRed 16,492]

At best Bush has maintained, his administration sure hasn't created the number of jobs seen previously. And now with the losses netting out against his gains, it will be interesting to see where his final numbers fall. Hardly an economic success story IMO.

[RunInRed 16,492]

Well, I realize that you don't know how to argue economics, but no point in calling me out. And, as I said in a previous post, unemployment is always a trailing indicator, not a leading one.

I was giving you props not calling you out.

[otterinbham 0]

Well, I realize that you don't know how to argue economics, but no point in calling me out. And, as I said in a previous post, unemployment is always a trailing indicator, not a leading one.

I was giving you props not calling you out.

Ah. In that case I apologize for the testy reply.

[TitanTiger 20,511]

At best Bush has maintained, his administration sure hasn't created the number of jobs seen previously. And now with the losses netting out against his gains, it will be interesting to see where his final numbers fall. Hardly an economic success story IMO.

You're parsing the information in a way that works best for Clinton, but doesn't tell the full picture. Clinton inherited an economy that was on it's way out of a recession. Unemployment numbers in George H.W. Bush's last year in office peaked at 7.8 in June 1992. But the time the election happened in November it was down to 7.4 and by Clinton's first full month in office in February 1993, it was 7.1. By inheriting both a high unemployment rate AND an economy on the mend, he had room to add jobs by the boatload.

Contrast that with Bush. He inherited an economy that was already contracting (by some measures it was already technically in recession), but an unemployment rate of 4.2. There's honestly not much room to grow from 4.2 even in a good economic situation as that's an insanely low unemployment figure. Had he managed to just maintain such a figure it would have been amazing much less create even more jobs and drive the figure lower. Even at the worse of the recession and post 9/11 shock the rate was at 6.3 which is considered right at the "normal" rate of unemployment even in solid economic times. For years many economists didn't think you could really get below 6%. From that point the economy recovered steadily with unemployment rates as low as 4.4% before the recent increases. And we're still only at 5.5%.

All in all, that's a decent economic record. Could it have been better? Yes. Had he used his veto to get rid of excessive spending and not saddled us with both an expensive war in Iraq and an insanely expensive Rx plan, I think we'd be doing a lot better. But given the circumstances each faced, Bush's economic record is not something you can ding by acting like unemployment rates are awful.

[Tigermike 3,055]

In May, that changed for the worse, as unemployment rose to its highest level since October 2004. However, only 49,000 workers lost their jobs, which doesn’t nearly account for the four-tenths rise.

The real story here is unemployment among entry-level workers to the employment system. In summer, teenagers and college students enter the marketplace looking for seasonal and part-time work. This accounts for the significant rise in job-seekers and the 0.4% increase in unemployment. Otherwise, an overall job loss of 49,000 jobs would account for a 0.0004% increase in a market of 138 million workers.

Why have these new job seekers found it difficult to get jobs? One reason is that Congress made jobs costlier just in time for this economic slowdown. Congress raised the minimum wage last year by seventy cents an hour, from $5.15 to $5.85. It will rise again in July to $6.55 an hour, and next year will hit $7.25 per hour. That makes entry-level labor as much as 27% more expensive this summer, when consumers have already slowed down their spending. The natural loss of work from the slowdown amplifies the effect of the minimum-wage increase, because businesses now cannot afford to raise prices to maintain their entry-level positions.

Now we see it unfolding before our eyes. Will the Democrats acknowledge the error and take the blame for hundreds of thousands of jobs lost to their economic meddling — or will they try to shift the blame to the Bush administration for no good reason at all? The answer to that question has been answered by non other than runinred63.