Global economy at risk as Asia, Europe, US slow

Associated Press

WASHINGTON

The global economy’s foundations are weakening, one by one.

Hobbled by Europe’s debt crisis, the world risks being hurt by slowdowns in its economic powerhouses.

The U.S. economy, the world’s largest, had a third-straight month of feeble job growth in May. High-flying economies in China, India and Brazil are slowing, too.

Fears of a global economic downturn have sent investors rushing toward the safest possible investments: U.S. and German government bonds. As a result, the interest rate on the 10-year U.S. Treasury note has hit a record-low 1.46 percent. The rate on the German 10-year bond is even lower: 1.17 percent.

“Treasurys are at 1.46 because people are freaking out,” says Mark Vitner, senior economist at Wells Fargo Economics.

The gravest fear is Europe. The most urgent threat is that in mid-June, Greek voters will reject the terms of a $170 billion bailout — which called for painful budget cuts — and abandon the euro. Yet the global economy’s troubles go beyond Greece. Here’s a look at the global economy’s vital signs:

UNITED STATES

American employers added just 69,000 jobs in May. Since averaging a healthy 252,000 a month from December through February, job growth has slowed to a lackluster average of 96,000 a month.

On Friday, after the government issued the May jobs report, the Dow Jones industrial average sank 275 points. It was the Dow’s biggest loss since November, and it’s now down 0.8 percent for the year.

The dismal news suggested that the U.S. economy is enduring a midyear slump just as in 2010 and 2011.

Unemployment rose to 8.2 percent from 8.1 percent in May as 642,000 more Americans poured into the work force, and only 422,000 more people got jobs.

The jobs report came out a day after the government said the U.S. economy grew at just a 1.9 percent annual rate in the first three months of 2012. That’s a meager pace nearly three years after the recession officially ended in June 2009. And it’s too slow to generate many jobs or to lower the unemployment rate. In good economic times, the rate would be below 6 percent.

EUROPE

Unemployment in the 17 countries that use the euro is at 11 percent, the European Union’s Eurostat office said Friday. It’s the highest rate since the euro was introduced in 1999.

European countries have been struggling with their debt crisis for three years. Three nations — Greece, Ireland and Portugal — have already required bailouts because of unsustainable levels of debt.

Austerity has been the main prescription for the crisis. But spending cuts and tax increases are causing economies to shrink across the eurozone.

ASIA, SOUTH AMERICA

Since the global recession ended in 2009, the world economy has been fueled by rising powers in the developing world led by China, India and Brazil.

Now, all three are running into trouble.

China’s manufacturing weakened in May, according to surveys out Friday. Factory output was the weakest in three months.

Some economists say China’s economic growth will fall to an 8 percent rate in the April-June quarter. That’s high by Western standards, but it would be the weakest growth for China in nearly three years. In response, China is rolling out an economic stimulus program.

India is suffering an even sharper slowdown. Its economic growth slowed to a 5.3 percent annual rate in the January-March quarter, the lowest in nine years.