May shows dismal employment numbers
Stacey Vanek Smith: The U.S. economy added 133,000 private sector jobs in May, that’s according to a report from ADP data processing — that was fewer jobs than expected. At the same time, the number of workers filing for unemployment benefits rose, and the number of planned layoffs in May hit an eight month high.
Joining us to make sense of all this is Diane Swonk, chief economist with Mesirow Financial in Chicago. She’s with us live. Good morning, Diane.
Diane Swonk: Good morning.
Vanek Smith: Diane what do you make of the jobs news out this morning?
Swonk: Well certainly it’s tepid jobs data and it really has to be taken into context. We’ve already seen much of the pay back to unusually mild winter weather in the months of March and April, and that helped to suppress those monthly numbers. The May data, looking much weaker than expected is really more fundamental weakness in the U.S. economy. We are seeing the manufacturing sector start to slow down after it had been a shining star in the U.S. economy for much of the last six months.
Vanek Smith: Are we starting to see the jobs situation plateauing? It had been improving.
Swonk: Well we actually have seen the jobs situation, after it improved earlier in the year, the jobless claims had begun to come down. Now they plateaued at minimum at a higher level than people would like, and in the most recent week of course popped up. Now there was a holiday in that most recent week, but even with that it could mess up the numbers. We’ve seen a lot of upward revisions as we’ve gone back and looked at the data and adjusted it, so the trend is in the wrong direction as we move into summer and people continue to worry about the weakness in Europe spilling over to the U.S.
Vanek Smith: We also got news that GDP, the measure of economic growth, has been revised downward for the first part of this year. How significant is that?
Swonk: The most significant part of that report was the flip flop in the reporting of state and local government spending. We’d actually seen the state and local sector, the lion share of government spending, increase initially in the GDP report. Now it’s actually declining. It sort of throws some cold water on the thought that many state and local governments had already bit the bullet and done the hard cutting they needed to do last year and raises concerns that the state and local government sector will not be an impetus to growth this year. It could be yet another stumbling block, and frankly, we’ve got enough already.
Vanek Smith: Diane Swonk with Mesirow financial in Chicago. Thank you, Diane.
Swonk: Thank you.
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