Original link: The News-Press, FL  06.03.11

June 3, 2011

A disappointing May jobs report Friday cemented a three-day slide on the stock market, but some observers see reasons to be optimistic.

After two months of strong hiring gains, employers added just 54,000 net jobs as the jobless rate rose one-tenth of a point to 9.1 percent, according to the Bureau of Labor Statistics.

The jobs report showed more robust private-sector hiring, but the number was dragged down by continued layoffs by state and local governments, which shed another 29,000 jobs.

The Dow fell 97 points, or 0.8 percent, to close at 12,151. The Dow had closed at 12,569.79 on Tuesday, a drop of 418 points, or 3 percent, in three days.

"It seems like every time the economy starts to get a little traction, it slips again," said Paul Weinstein, managing partner of the Weinstein & Wilkes Financial Group in Fort Myers. "This is just a step back."

The broader markets also took a step. The S&P 500 fell 13, or 1 percent, to 1,300. The Nasdaq composite fell 41, or 1.5 percent, to 2,733.

Investors need to look at this week's declines perspective with the past year's gains, said Doug Finley, president of Finley Wealth Management in Fort Myers.

"We have had a spectacular run-up in the past 12 months and, at some point, you have to have that pause that refreshes," Finley said.

A year ago, the Dow closed at 10,249.

Despite recent steps back, the economy has proved resilient through the Japanese disaster and pockets of political unrest around the globe, said economist Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida.

"The glass half-full view is that the economy has withstood some pretty serious shocks, but we are still growing," Snaith said.

Southwest Florida has been showing signs of the glass getting fuller. Unemployment continues to decline and is getting closer to the national rate.

Lee County unemployment last month was 10.8 percent in Lee and 9.7 percent in Collier.

Unemployment remains a high hurdle because it also slows the housing recovery, Snaith said.

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"If unemployment grows, that could lead to more foreclosures," he said.

Friday's jobs report fell short of analysts' consensus expectations by about two-thirds.

"This is a very disappointing report, confirming a sharp slowdown in economic growth this spring - $4 gasoline, fallout from the Japanese quake on the U.S. auto industry, and falling house prices are taking a heavy toll on the economy," said Mark Zandi, the chief economist for forecaster Moody's Analytics.

Zandi added that "businesses are flush and their balance sheets are very strong; it is not a question of whether they are able to invest and hire more, it is a question of their willingness. ... The economy doesn't move in a straight line, but all the trend lines are headed in the right direction."

Within the government's report, the data suggested high oil and gasoline prices have weighed on the economy. Leisure and hospitality is a category especially sensitive to prices at the pump, and employment in this category fell by 6,000. And retail sales employment fell by 8,500, as gasoline crowded out other purchases and hurt consumer sentiment.

The supply-chain disruptions stemming from Japan's devastating earthquake and tsunami are rippling through the U.S. economy as well, most notably in the manufacturing sector, which shed 5,000 jobs in May, ending a winning streak.

Earlier in the week, a key manufacturing index showed a sharp deceleration, attributed to Japan-related supply chain problems for carmakers manufacturing in the United States - American and foreign-owned alike.