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Dismal jobs report stirs fears of slide

Markets dive, as global jitters keep growing

The weakest national job growth in a year sent stock prices tumbling Friday and raised concerns about a stalling US economy and a broader global slowdown.

After a strong start this year, the national economy has produced three months of anemic job growth. Employers added a meager 69,000 jobs in May, while the unemployment rate rose for the first time since last summer, to 8.2 percent from 8.1 percent in April.

“It’s disappointing,” said John Silvia, chief economist for Wells Fargo Co. in Charlotte, N.C. “The expectation was we’d see more sustained growth. ... There really aren’t any bright spots for employment.”


Investors, already skittish from a worsening financial crisis in Europe, also failed to see bright spots. The Dow Jones industrial average suffered its worst one-day loss of the year, dropping 274.88 points to close at 12,118.57. Stock markets in Europe and Asia also sustained steep losses.

The employment report was a setback not just to job seekers, but also to President Obama, whose reelection chances are widely viewed as tied to the economic recovery. Meanwhile, former Massachusetts Governor Mitt Romney, the presumptive Republican nominee, seized on the weakening labor market to blast Obama’s policies.

This is the third consecutive year that has started with strong job growth — the nation added more than 500,000 jobs in the first two months of 2012 — only to give way to a dispiriting slowdown. Economists said a warmer than usual winter may have prompted businesses to hire earlier than they usually do, and cut back in the spring, accounting for some of the slowdown.

But deep political uncertainty in the United States, where big tax increases and steep budget cuts are scheduled to take effect early next year, and the ongoing crisis in Europe have also weighed on the economy.

The crisis in Europe started with concerns over the mounting debt in some nations and has begun to spread to the banking system, raising fears of a global financial meltdown similar to the one that began on Wall Street in 2008.


Sung Won Sohn, an economist at California State University, said the impact of the European crisis, which he said is “getting worse every day,” is particularly far-reaching. For example, China has been a locomotive of the global economy, but its top export destination is Europe, where demand has declined.

Weaker exports have led to slower manufacturing growth in China, which in turn has hurt economies in places such as Brazil and South Korea, which sell raw materials to China.

“The perception that the global economy is falling apart is affecting US business psychology negatively,” said Sohn. “Businesses are saying, ‘I better be cautious about hiring people because Europe is in bad shape, China is experiencing a slowdown, and Latin America can’t sell commodities. So let’s batten down the hatches.’”

Federal Reserve policy makers are expected to consider additional measures to stimulate the economy when they meet later this month. The Fed has held its key short-term interest rate near zero for more than three years and bought Treasuries and other bonds to help lower long-term rates, such as mortgages. Some analysts have suggested that the Fed might launch a new round of bond purchases to further lower rates to encourage consumers to spend, and businesses to expand and hire.

About 13 million Americans are unemployed, according to Friday’s report, including 5.4 million who have been out of work for six months or longer. Another 2.4 million Americans are unemployed, but not counted in government estimates because they have given up looking for work.


Construction sustained the deepest job losses in May, shedding 28,000 jobs to reach the industry’s lowest employment level since January 2011.

Mark Erlich, executive secretary of the New England Regional Council of Carpenters, said construction activity has begun to pick up locally, but not to the point of generating enough job opportunities for the thousands of construction workers laid off during the recession.

“There is always a lag between announcement of a project and boots on the ground,” Erlich said. “The pipeline is there, but it hasn’t yet triggered the level of employment we’re expecting in the next six months.”

Massachusetts weathered the recession better than the nation as a whole and has generally recovered faster. A forecast released this week by the New England Economic Partnership, a nonprofit group of economists, projected slow, but steady job growth for the state over the next few years.

The state’s unemployment rate, 6.3 percent in April, remains well below the national rate. The state releases May employment figures in about two weeks.

The Massachusetts economy has added jobs in each of the past five months, but executives at local staffing firms said they see some areas of concern. Outside of hot industries such as technology, health care, and education, hiring has concentrated on filling vacant jobs, not adding new positions, said Aaron Green, president of Professional Staffing Group of Boston.


In addition, he said, businesses are moving cautiously in converting temporary workers to full-time employees.

“Companies want to be more certain that the workload is ongoing before committing to a permanent hire,” Green said.

Casey Ross and Katie Johnston of the Globe staff contributed to this report. Megan Woolhouse can be reached at mwoolhouse@globe.com.