There's no way to spin it any other way. The May employment report was very weak. In addition to the weak job growth in May, April's numbers were revised down significantly. Looking at the numbers, the weakness was evident in several sectors, but two stand out. Professional and business services added between 70,000-90,000 jobs per month in late 2011 and early 2012, but was flat in May. Leisure/Hospitality, which had been adding 30,000-45,000 jobs, lost jobs last month. Together, they represent between a 100,000 and 135,000 decline in the amount of job growth.
Digging further, the index of aggregate hours worked declined and is down at a 1.24% annualized rate over the last 3 months, suggesting that economic growth will be very weak at best in the second quarter. The household survery shows both an increase in the unemployment rate to 8.2% and an increase in the U6 broad measure of unemployment to 14.8%. Perhaps more importantly, estimates of full-time employment declined by over 1 million workers in the last 2 months while those working part-time rose (including a 400,000 increase in those working part-time for economic reasons over the last 2 months). Add it up and it shows a weakening economy. As discussed previously, the data from earlier in the year were distorted somewhat by seasonal adjustments and weather, but the size of the decline in job growth indicates that it's not just payback from overestimates in December-February, but a weakening economy.
Looking forward, the economy faces considerable pressure in the coming months. Financial markets are reflecting the most stress since the end of the recession in the summer of 2009 (see previous post). Does this mean that the US is heading into another recession? At this point, it still looks like a weak expansion, but as the global economy slows (India, China, Brazil, Europe, ...) and risks of financial contagion from Europe increase, the recovery is likely to become more fragile. Add to this uncertainty in terms of tax policy (expiration of many tax cuts at the end of this year) and the economy will continue to struggle through at least early 2013.
I know some readers are probably wondering if there's any good news? Gas prices are going to continue to decline (wholesale price is $2.65 as of this writing, down 65 cents from its recent high in March). In addition, both inflation and interest rates are likely to remain low as economic weakness persists.