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By Jason Stipp | 06-03-2011 09:57 AM

May Job Disappointment: More Than a Blip?

Our take on May's meager job gains, the possibility of additional stimulus, and what comes next for the employment market.

Jason Stipp: I'm Jason Stipp for Morningstar. We expected a pretty soft employment report for May and we got a pretty dismal one on Friday. Only 54,000 jobs were added to the economy. The unemployment rate ticked up a little bit to 9.1%.

Here with me to dig into the numbers is Morningstar equity analyst Vishnu Lekraj, and Bob Johnson, director of economic analysis. Thanks for joining me, guys.

Vishnu Lekraj: Thanks.

Bob Johnson: Good to be here.

Stipp: So, Bob, first question for you. We knew that there was going to be some anomalies in this report due to some things that we saw in the month of May, but 54,000 jobs added, is that so low that anomalies alone can't explain it, that there is some fundamental weakness going on here?

Johnson: I think the number definitely indicates some weakness in the economy combined with some of the other weaker numbers that we've seen in the economy. Now, there are some special factors under the numbers that may not make the number look as bad as it did on the surface. But it is a weak number, and probably more than the headline employment number, what worried me in the number was that real wage number actually year-over-year now moved into a negative standpoint, and that worries me more than anything else because that means a little less consumer spending down the road, and that's going to cause me to bring my economic forecast down to growth of 2.5% to 3%.

Stipp: Vishnu, you also talked about some of the supply chain issues that we are going to see in the month. Were you surprised, though, of the [negative] effect that we did see ... and what do you think we would have seen if we hadn't seen those supply chain problems?

Lekraj: Well, ... what I said in the last video was, I was expecting something a little over 100,000; if it was below that, I will be scared. To be honest with you, I'm a little concerned about this. Supply chain issues were a big concern. The commodity prices, I believe, are scaring some of the business leaders within the economy, but if you take those things out, if you ask yourself naturally back during the February-March time, and if you don't factor in rising commodity prices or supply chain issues, I think we would have been on a track for between 150,000 and 250,000 every month on average, but when you factor everything in here, if I'm a business person and I am sitting there, I am in a CEO chair, and I have some plans that I made in January and then I look on the horizon, I see oil spiking, I see input prices spiking, Japan almost got destroyed, and production is very low, I am going to hold back on my plans--and that includes hiring.

Stipp: So, we saw actually 83,000 private sector jobs added, government subtracted from that, so you're saying without some of these anomalies we might have seen may be double that?

Lekraj: Maybe and when you look at the pattern, when you look at the job growth and you take a look at some of the plans that were made at the beginning of the year for hiring, definitely I do believe it would have been at least over 100,000, maybe closer to 200,000.

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