The U.S. economic recovery is faltering.
Manufacturing — a consistent driver of growth over the past year -- slowed dramatically last month, according to data released Wednesday. Private job creation was exceptionally weak in May, other data showed Wednesday. Adding to that, home prices are falling, consumers are spending less, and companies are laying off more workers, according to other recent reports.
Putting it all together, the economy is still expanding, but the pace is sluggish, and it’s clearly losing momentum. Several analysts who had been relatively optimistic about growth this year have cut back their estimates in recent weeks.
Wednesday’s financial markets also reflected the grim outlook. The interest rate that the U.S. government must pay to borrow money for 10 years fell to 2.98 percent, from 3.06 percent on Tuesday and 3.74 percent in February. Investors instead favored the safety of government bonds and anticipated that the Federal Reserve will keep interests rates low for longer than initially expected.
The stock market was down 1 percent Wednesday morning as measured by the Standard & Poor’s 500, although it has been more stable in recent weeks despite the softening growth picture.
The Institute for Supply Management said Wednesday that its index of manufacturing activity fell to 53.5 in May from 60.4 in April. Numbers above 50 indicate expansion, and analysts had expected a more modest pullback to 57.1. New orders and production fell the lowest, likely triggered by disruptions in auto and other production after the March earthquake and tsunami in Japan, which has hurt supply chains around the world. Despite the temporary setbacks, however, May showed the slowest rate of expansion in the nation’s factories since September 2009.
“Earlier in its recovery, manufacturing had the wind at its back from a very pronounced rebuilding of inventories, said Cliff Waldman, economist at the Manufacturers Alliance/MAPI, a trade group. “At this point, however, elevated commodity prices, slowing global growth and an increasingly questionable outlook for the U.S. economy are creating head winds for the factory sector, which thus far has been the one strong element in an otherwise sluggish U.S. economic rebound.”
Also Wednesday, ADP, the payroll processing company, said that the rate of job creation at private businesses slowed sharply last month. Firms added only 38,000 jobs, ADP estimated, compared with 179,000 jobs added in April. While the ADP survey is inconsistent in predicting overall job growth according to official government numbers, the May report adds to other negative signs about the job market. The number of people filing new claims for unemployment insurance benefits has drifted up in recent weeks.
On Friday, another set of numbers will add to the national economic picture: The Labor Department will release its report on May job growth and the unemployment rate. Economists expect that about180,000 new jobs were created last month, dropping from 244,000 in April, and that the unemployment rate has edged down to 8.9 percent from 9 percent.
Read more at The Washington Post.