For US employers, 'hiring is a function of demand'

Job seekers gather for employment opportunities at the 11th annual Skid Row Career Fair at the Los Angeles Mission on Thursday, May 31, 2012 in Los Angeles. Two straight months of disappointing job growth have raised fears that the U.S. economy is stalling for the third year in a row, but this year's slowdown is an improvement on last year's, which was an improvement on the year before's. (AP Photo/Damian Dovarganes)

Job seekers gather for employment opportunities at the 11th annual Skid Row Career Fair at the Los Angeles Mission on Thursday, May 31, 2012 in Los Angeles. Two straight months of disappointing job growth have raised fears that the U.S. economy is stalling for the third year in a row, but this year's slowdown is an improvement on last year's, which was an improvement on the year before's. (AP Photo/Damian Dovarganes)

Job seekers gather for employment opportunities at the 11th annual Skid Row Career Fair at the Los Angeles Mission on Thursday, May 31, 2012 in Los Angeles. Two straight months of disappointing job growth have raised fears that the U.S. economy is stalling for the third year in a row, but this year's slowdown is an improvement on last year's, which was an improvement on the year before's. (AP Photo/Damian Dovarganes)

WASHINGTON (AP) ? The U.S. economy suddenly looks a lot weaker.

Only 69,000 jobs were added in May, the fewest in a year, and the unemployment rate rose from 8.1 percent to 8.2 percent.

The dismal jobs data will heighten fears that the economy is sputtering. It also puts President Barack Obama on the defensive five months before his re-election bid. And it could lead the Federal Reserve to take further steps to help the economy.

The Labor Department also said Friday that the economy added far fewer jobs in the previous two months than first thought ? 11,000 fewer in March and 38,000 fewer in April. And the increase in unemployment was the first in 11 months.

Job creation is the fuel for the nation's economic growth. When more people have jobs, more consumers have money to spend ? and consumer spending drives about 70 of the economy.

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Here's what The Associated Press' reporters are finding:

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WHY ONE EMPLOYER ISN'T HIRING

When Michael Eberstadt opened his New York City soul food restaurant in 2007, he had a staff of about 25.

"That was right before the world ended," said Eberstadt, owner of Rack & Soul, referring to the recession that began in December that year. He's since shrunk his staff to about 15.

"Hiring is really a function of demand," he said. "Unfortunately, if the demand isn't there, then you don't need to hire."

Eberstadt said his restaurant was "hit hard and never really recovered" from the recession. Last year, the top 500 restaurant chains reported sales growth of just 3.5 percent, according to the food industry researcher Technomic Inc.

Still, Eberstadt is relieved he hasn't had to lay anybody off recently. His payroll has held steady for the past year.

? Candice Choi, AP Business Writer

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SEEKING SOLUTIONS

What can be done to energize U.S. hiring?

Sung Won Sohn, an economics professor at California State University, said Congress and the Obama administration must work immediately to address the "fiscal cliff" looming at year's end. That's when the economy will be hit with higher taxes and across-the-board government spending unless Democrats and Republicans forge some compromise.

Uncertainty over what will be done about the fiscal cliff will likely hang over the U.S. economy for months.

"Businesses have pulled in their horns, given the growing amount of uncertainty," Sohn said.

He said Federal Reserve Chairman Ben Bernanke could also start discussing another round of Fed bond buying to try to further lower long-term interest rates.

Sohn noted that more bond buying remains unlikely given how low rates are already. Still, he said, "just the fact that Bernanke is talking about more Fed bond buying would be important. What we need is a psychological lift."

? Martin Crutsinger, AP Economics Writer

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PREDICTING MORE FED ACTION

"This clearly puts the Fed back in play for a near-term easing operation," says Jay Feldman, director of U.S. economics for Credit Suisse.

Feldman expects the Fed to act at its next meeting June 19-20 ? perhaps by buying mortgage-backed investments to try to push down long-term mortgage rates or by doing something unexpected.

That said, mortgage rates are already hitting bottom. The average rate on the 30-year fixed-rate mortgage fell this week to 3.75 percent. That's the lowest since long-term mortgages began in the 1950s.

? Paul Wiseman, AP Economics Writer

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PAIN ON WALL STREET

Stocks sank after the release of the jobs report. The Dow Jones industrial average dropped more than 200 points, erasing what was left of its gain for the year and putting the index on track for its worst one-day drop since November.

Economic data from Europe and Asia also came in weak, and traders sold all types of risky investments and stampeded toward the safety of U.S. government bonds. Bond prices rose sharply. And the yield on the 10-year U.S. Treasury note touched 1.44 percent, the lowest on record.

? Daniel Wagner, AP Business Writer

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BACK IN THE HUNT: OLDER WORKERS

Last month, 642,000 people began looking for work. And nearly half were 55 or older.

Many have had no choice. Household wealth has shrunk as home equity and stocks prices have declined or languished. And many older people are helping struggling adult children.

Sara Rix, a policy analyst at the AARP's Public Policy Institute, suggested that last month's influx of older workers shows many had become more hopeful about their job prospects after hiring strengthened early this year.

The decline in the unemployment rate in previous months likely "made people more optimistic," Rix said.

? Christopher S. Rugaber, AP Economics Writer

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DUELING POLITICAL VIEWS

White House economist Alan Krueger said that while the latest jobs report illustrated the need for faster growth, the administration welcomes any increase in jobs.

"We are on a better path then we had been before the president came into office," he said.

Obama's Republican challenger, Mitt Romney countered: "Today's weak jobs report is devastating news for American workers and American families. ...It is now clear to everyone that President Obama's policies have failed to achieve their goals and that the Obama economy is crushing America's middle class."

? Darlene Superville, Associated Press Writer

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GOVERNMENT ISN'T HELPING

Government jobs cuts are worsening the jobs picture. The federal government shed 5,000 jobs in May. State governments cut 5,000 and local governments 3,000.

Overall, governments have cut jobs in 10 of the past 12 months.

Tax collections by state and local governments have been rising since mid-2009. Yet the belt-tightening continues. From January through March, government cuts reduced U.S. economic growth by 0.78 percent point to an annual pace of just 1.9 percent.

"Typically, the government offers a base level of support" when the economy is weak, says Scott Brown, chief economist at Raymond James & Associates.

"In this case, the government is actually contributing to the weakness of the recovery. ... You're talking about teachers getting laid off. Government worker have families. They have mortgages. They spent their paychecks."

? Paul Wiseman, AP Economics Writer

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BIG CUTS IN CONSTRUCTION

Some major industries absorbed steep job losses in May.

Construction firms cut 28,000 jobs. That was the sharpest such drop in two years.

Governments shed 13,000. Amusement parks, museums and casinos cut nearly 17,000 positions. Professional and business service firms, which include high-paying positions in accounting, engineering and legal services, dropped 1,000.

On a hopeful note, a few key industries created jobs. Manufacturers added 12,000. Transportation and warehousing companies created nearly 36,000. And 46,000 jobs were added in education and health care. Hotels and restaurants added roughly 9,000 jobs.

? Christopher S. Rugaber, AP Economics Writer

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CONSIDER THE 'EMPLOYMENT RATE'

To assess the job market, most people look at the unemployment rate. But it can be misleading. The rate can fall, for example, even if hiring is weak.

This can happen when many people stop looking for work and are no longer counted as unemployed. The rate can also rise even when jobs are created, if more people start looking. The number of unemployed often rises. That's what happened in May.

Then there's the "employment rate." It measures the percentage of adults who do have jobs. And it's painting a more sobering picture.

Consider: The unemployment rate has dropped almost a full percentage point from August, from 9.1 percent to 8.2 percent. That might suggest the job market is steadily strengthening. Yet the employment rate has improved only slightly in that time, from 58.3 percent to 58.6 percent. That's lower than when the recession ended, when it was 59.4 percent.

So why the difference? The economy has added jobs since August ? but only about enough to keep up with population growth and prevent the unemployment rate from heading up.

? Christopher S. Rugaber, AP Economics Writer

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EUROPE STILL WORSE

As bad as the May employment numbers were, Americans can take solace from one thing: It's a lot worse in Europe.

Unemployment in the 17 countries that use the euro currency hit 11 percent in April, the highest since the single currency was introduced in 1999, the European Union's Eurostat office reported Friday.

"Europe would gladly trade places with the U.S.," says Josh Feinman, global chief economist of DB Advisors.

But Europe's problems are likely to pinch America too, by denting U.S. exports to Europe and rattling financial markets. And should the U.S. economy, the largest in the world, weaken further, that would further damage economies in Europe and Asia.

? Paul Wiseman, AP Economics Writer

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COUCH-SURFING

The job market remains tough even for the very educated or very experienced. Erica Johnson, 33, calls herself a "couch-surfing Ph.D." because she's been sleeping on sofas in the homes of friends and relatives in Lexington, Ky. Armed with a doctorate in education policy, she'd like to work as a college administrator.

But most management jobs she's pursued require more experience. Yet she's considered over-qualified for lower-level jobs.

"There aren't a lot of mid-level openings," Johnson said, after many states have cut education budgets.

Phil Allen, 48, a PR professional in suburban Chicago, says he's had 70 job interviews in the past year. He gave a 20-minute presentation as part of an all-day interview for one opening this spring and left thinking, "There's no way I'm not going to get this job."

"But I didn't get it," he said. "That's kind of a crushing thing."

? Christopher S. Rugaber, AP Economics Writer

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SLOW RECOVERY

Nearly three years into the recovery, hiring remains weak by every historical standard.

Consider what happened when companies slashed jobs in the 1981-82 recession. In September 1982, layoffs ran at an annual rate topping 4 percent. But the economy rebounded explosively. And job growth followed. By February 1984, 15 months after the recession had ended, hiring was occurring at a 6.5 percent annual pace.

During the Great Recession, job cuts were even steeper. They occurred at a 6 percent to 7 percent annual rate in the winter of 2008-09. Yet since the recession officially ended in June 2009, job gains have been fitful. Hiring has only recently topped 2 percent of total payrolls ? just one-third the pace after the 1981-82 recession.

What's going on this time?

Mainly, the economy is too weak to drive more job growth. Consumers are still cautious about spending. And the housing sector is still weak. Both are weighing on the economy more than in previous recoveries.

? Christopher S. Rugaber, AP Economics Writer

Associated Press

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