Today's numbers show U.S. job grow in a downward trend: Does this increase the odds that the Fed will move in June?

06/01/2012 1:53 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Job creation in the United States has gone into reverse. Instead of the economy producing an increasing number of net new jobs, as it did from November 2011 through January 2012, the rate of job growth has gone into a decline strong enough to call it a trend.

In May, the Bureau of Labor Statistics announced this morning, the economy added only 69,000 jobs. That’s down from the 77,000 jobs gained in April (revised downward today from an initial 115,000 figure), and well below the 150,000 increase expected by economists surveyed by Briefing.com.

The trend for 2012 now looks like this: 275,000 net new jobs in January, 259,000 in February, 143,000 in March, 77,000 in April, and now just 69,000 in May.

It would be comforting to say that the problem is a result of a rising number of layoffs in the state and local government sector, but that simply wouldn’t be true. The news from the government sector was indeed terrible with the sector reporting 13,000 net jobs lost in the month (up from 10,000 lost in April and 4,000 lost in March.) But the news from the private sector was grim on its own. Net private sector jobs increased by just 82,000 in May (down from a revised 87,000 net new private sector jobs in April). The 82,000 increase was the worst private sector performance since August 2011.

In data also released today by the Commerce Department consumer spending rose by 0.3% in April, up from a 0.2% increase in March.

But today’s jobs numbers certainly raise a strong likelihood that May won’t see consumer spending rise by even that much. In May a fall in the average hours worked and the small gain in jobs added up to 0.1% drop in aggregate incomes. There’s certainly a good chance that the May consumption numbers will reflect that drop in income.

The official unemployment rate rose to 8.2% from 8.1% as the workforce participation rate climbed slightly in May. The full unemployment rate, which counts workers who have given up looking for work and those with part-time jobs who would like full-time work, rose to 14.8% in the month from 14.5% in April.

Not surprisingly the Standard & Poor’s 500 stock index was down by 1.77% as of 12:30 New York time.

Many observers, including yours truly, think that the June 19-20 meeting of the Federal Reserve, marks the last good chance for the Fed to move on a new program of quantitative easing. Anything later than that runs too close to the election, the argument goes, and would leave the Fed open to charges of political bias. (The Fed’s next meeting is July 31-August 1.) Given the lack of a consensus at the Fed, I think the odds favor something relatively conservative such as an extension of the Fed's Operation Twist. (That's the Fed's program of selling shorter maturity Treasuries and buying longer maturity Treasuries to bring down long-term interest rates.)

Ben Bernanke and company certainly have a lot to chew on in the next three weeks.

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