Bleak jobs report dims hopes for steady recovery

Associated Press

WASHINGTON

A bleak jobs report suggests the recovery from the Great Recession will be longer and bumpier than many economists had envisioned.

Most economists say job growth should strengthen later this year as gasoline prices drop further and the economy recovers from the effects of natural disasters in the U.S. and abroad. But the recovery is starting to weaken 17 months before the 2012 election, which could hurt President Barack Obama’s re-election prospects.

The unemployment rate in May inched up to 9.1 percent from 9 percent, the Labor Department said Friday; when Obama took office, it was 7.8 percent.

The Conference Board, a business-research group, predicts the rate will be 8.5 percent at the end of next year. That would mean Obama would face a higher unemployment rate than any president running for re-election since World War II.

“The recovery has not been derailed, but it’s slow,” said Michelle Meyer, an economist at Bank of America Merrill Lynch. “We’re still in a muddle-through period.”

Only 54,000 jobs were created in May, the fewest in eight months. By contrast, an average of 220,000 jobs were created in each of the previous three months. Private companies hired only 83,000 workers in May — the fewest in nearly a year — while state and local governments cut 30,000 jobs.

The Dow Jones industrial average finished down 97 points, its third-straight loss. The Dow, Standard & Poor’s 500 and Nasdaq composite all have declined in each of the last five weeks, the longest losing streak since mid-2008.

Several chronic problems are weighing on the economy. Home prices still are falling. The average worker’s pay isn’t keeping up with inflation. Cutbacks in spending by state and local governments are contributing to slower growth, even in the private sector. And members of Congress are preparing to cut spending.