Employers added 54K jobs, rate ticks up to 9.1 pct
June 3, 2011 9:09 AM ET.

By CHRISTOPHER S. RUGABER

WASHINGTON (AP) - American employers hired only 54,000 new workers in May, the fewest in eight months, and the unemployment rate rose to 9.1 percent.

The Labor Department report offered startling evidence that the U.S. economy is slowing, hampered by high gas prices and natural disasters in Japan that have hurt U.S. manufacturers.

The pace of hiring has weakened dramatically from the previous three months, when the economy added an average of 220,000 new jobs. Private companies hired only 83,000 new workers in May — the fewest in nearly a year.

Stock futures plunged after the report was released.

Local governments 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 presents a huge challenge to President Barack Obama's reelection prospects next year. And it followed a string of disappointing economic data in the past month that suggest the economy is hitting a soft patch after a strong start.

The manufacturing sector, a key driver of the economic recovery, grew at its slowest pace in 20 months in May. Home prices are still falling and reached their lowest level since 2002 in March.

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

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 9.0 percent in April. The number of unemployed rose to 13.9 million.

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

The weakness in hiring was widespread. Manufacturers cut 5,000 jobs, the first job loss in that sector in seven months. That 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 purchasing parts. Many auto parts are manufactured in Japan and the March 11 earthquake in that country has disrupted supply chains..

Retailers cut 8,500 positions, after adding 64,000 in April. And leisure and hospitality which includes restaurants and hotels, cut 6,000 jobs. That came after they added an average of 43,000 in the previous three months.

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

Still, the economy needs to generate at least 100,000 jobs each month just to keep up with population growth and prevent the unemployment rate from rising. And 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. Another 2.2 million have stopped looking in the past year. All told, the "under-employment" rate was 15.8 percent, down from 15.9 percent the previous month.

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