US jobless rate up in blow to Obama re-election

The United States added a scant 69,000 jobs in May and the unemployment rate rose for the first time in almost a year, the government said in a report spelling more trouble for President Barack Obama's reelection.

The dramatically weak numbers signaled that the much hoped-for recovery in the job market has stalled, but they fueled new speculation that the Federal Reserve will step in with a fresh round of stimulus for the economy.

The jobs gain was the smallest since May 2011, when 54,000 jobs were added, and less than half of what analysts had forecast.

The jobless rate ticked up to 8.2 percent, against expectations that it would hold steady at April's 8.1 percent. It was the first rise since June 2011, when it climbed to 9.1 percent from 9.0 percent.

"There are no easy explanations for May; the numbers suggest a far weaker economy than do other recent data," said Sophia Koropeckyj at Moody's Analytics.

"The numbers do not bode well for the president's reelection," she added.

The data came just five months ahead of the November 6 presidential election election amid a campaign dominated by concerns about the slow, fragile recovery.

The world's largest economy slowed from an annual growth rate of 3.0 percent in the final quarter of 2011 to a 1.9 percent pace in the first quarter, too weak a pace to dent unemployment.

Obama argues that his Democratic administration pulled the economy back from the brink of another Great Depression after the 2008 Wall Street financial meltdown.

Speaking at a Honeywell factory in the Minneapolis area, Obama said the American economy was facing "serious headwinds" such as the eurozone debt crisis.

But he also recalled how bad the economy was when he took office. "We knew it would take time," the president said of the recovery. "We knew there would be ups and downs along the way."

But Republican presumptive nominee Mitt Romney called the latest news a "harsh indictment" of Obama's presidency.

"Their policies have made it harder for the economy to recover," he said in an interview with CNBC.

The bad jobs numbers will focus even more attention than usual Thursday, during Federal Reserve chairman Ben Bernanke's testimony to Congress on the economic outlook, for clues to a shift toward more stimulus.

Jeffrey Rosen at Briefing.com said the report confirmed that the labor market has reversed direction after showing "so much promise" from November through March.

Layoffs have started to increase recently, he noted. "That means that businesses are not in a wait-and-see mode but are actively looking to pare down costs amid the possibility of an economic slowdown."

In May, almost three years after the deep 2008-09 recession, the private sector gained a mere 82,000 jobs, led by increases in health care and transportation.

The embattled construction sector, still reeling from the collapse of a housing price bubble six years ago, lost another 28,000 jobs.

The public sector shed 13,000 jobs as government continues to cut spending in the face of slow growth and large deficits.

The Labor Department also slashed its estimate of April job gains by 33 percent, to 77,000, and lowered its March estimate.

The labor market has softened substantially in recent months. In the first quarter, the average job gain was 226,000. In April and May, the average fell to 73,000.

The May jobless rate uptick was due to a 0.2 percent rise in the participation rate as more than 600,000 people joined or rejoined the labor force.

But not all of them got jobs. The number of unemployed rose by 220,000, to 12.7 million.

"The hiring environment appears to have weakened, and anxiety about the outlook seems to have led many employers to put hiring plans on hold," said Jeffrey Greenberg at Nomura Securities.

A number of analysts agreed that the central bank's Federal Open Market Committee now has the cover to take action at its June 19-20 meeting, with one option the launch of a third round of quantitative easing, or bond purchases.

"Today's report clearly raises the probability that the FOMC will decide to provide further accommodation," Greenberg said.

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