Weak US job figures for May hit markets

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Stock markets have fallen following worse-than-expected US job figures.

The Dow Jones closed down 275 points, or 2.2%, while in Frankfurt the Dax was down 3.4%, in Paris the Cac 40 fell 2.2% and London's FTSE 100 lost 1.1%.

The US economy added 69,000 jobs in May, well below forecasts. It was the smallest number created since May 2011.

Earlier, EU figures showed the eurozone jobless rate at 11% in April, unchanged from March, but still the highest since records began in 1995.

The drop in the Dow was the biggest one-day fall in seven months, taking the index to its lowest level since 21 December last year.

Responding to the job figures, US President Barack Obama said there was "a lot of work to do to get to where we want to be... but we will come back stronger".

While pointing out that the manufacturing sector had been "consistently adding jobs for the first time since the 1990s", he called on Congress to pass more measures included in his jobs bill that would help put people back to work.

US President Barack Obama: ''Our economy is still facing some serious headwinds"

"There is no excuse when so many people are looking for work. Now is not the time to play politics, not the time to sit on your hands," he said.

He highlighted measures to prevent more layoffs, proposed legislation to put construction workers back in work, tax breaks for small companies to help them hire more staff and measures to help homeowners refinance their mortgages.

'Awful number'

The US jobless rate rose to 8.2% from 8.1% in April, the Labor Department said.

To make matters worse, the number of jobs added in March and April was revised down by 49,000.

There are five million fewer jobs in the US than there were when the recession began.

Republican presidential candidate Mitt Romney said: "Today's weak jobs report is devastating news for American workers and American families."

He described the report as, "a harsh indictment of the president's handling of the economy".

Analysis

These figures are a kick in the teeth for President Obama's re-election campaign. Later on Friday he'll be in Minneapolis to talk about jobs for veterans - but instead of doing so against the background of steady if unspectacular growth, his remarks will be bracketed by deep gloom about the economy's medium-term prospects. There is no single issue more important in America today than jobs.

At the beginning of the year, when the economy looked as if it had reached escape velocity, the spotlight was on Republican presidential contenders and how they might have to change their economic message in the light of decent job growth. Now, after three months of deeply unimpressive job growth, the administration is firmly on the back foot. With five months to go before the election, the timing of the rise in unemployment is electorally horrible.

Obama defenders can point to his dreadful economic inheritance in 2008 and the current turmoil in Europe - few presidents in recent history have been dealt a poorer economic hand. Also, economies around the world are feeling the impact of the eurozone's struggles. But after almost four years, voters believe that the President "owns" the economic story.

Romney supporters were carrying "America Isn't Working" placards at a rally on Wednesday, with an illustration of a long queue of unemployed lifted from a British Conservative party poster from 1979. Expect to see a lot more of that in the coming months.

Employment increased in the categories of healthcare, transport and storage, and wholesale trade, but declined in construction.

The number of people who had been unemployed for more than 27 weeks, who are classified as long-term unemployed, rose to 5.4 million in May from 5.1 million in April.

They account for 42.8% of the unemployed.

"It's an awful number," said Rick Meckler, president of Libertyview Capital Management in New Jersey.

"Not only is it awful in its numerical terms, it comes at a very skittish time in the markets because of the European crisis. A number like this brings concern about a global slowdown."

The participation rate, which shows the number of people employed as a proportion of the workforce, rose to 63.8% from 63.6%, reversing the decline seen in April.

Global problems

European stock markets and US stock market futures were already lower following more signs of weakness in the Chinese and eurozone economies.

As well as the eurozone jobless figures, an influential business survey for the eurozone suggested the pace of contraction in its manufacturing sector was increasing.

And a similar report in China showed activity in its biggest, mainly state-owned, factories hit the lowest point this year in May due to weak domestic demand.

Following the release of the US jobs figures the euro briefly fell below $1.23 to hit its lowest level since July 2010, before recovering to stand at $1.2355.

The final estimate for the US purchasing manager's index (PMI) for May suggested that the manufacturing sector was growing, but by less than it had done since February.

The PMI came in at 54.0, down from 56.0 in April. Any figure above 50 indicates growth.

Separate figures showed that there was a small rise in US consumer spending in April. It rose 0.3%, having gone up by a revised 0.2% in March.

Personal incomes grew by 0.2% in April, which was the smallest gain since November and suggests spending may be limited in the coming months.

Consumer spending accounts for about 70% of US economic activity.

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