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May’s Jobs Report Disappoints Across the Board

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Well, this is a bad employment report — across the board. The Bureau of Labor Statistics reported that the economy created just 69,000 jobs in May -- the fewest in a year -- and the unemployment rate crept up to 8.2 percent.

As is always the case in an election year, voters have their eyes firm on the trend of that headline unemployment number. In the accompanying video, my Daily Ticker colleagues Aaron Task and Henry Blodget talk to Politico's Morning Money columnist and Wall Street reporter Ben White about the political implications of this grim payroll number.

After a decent start to the year, President Obama "cannot make the case clearly, at least at this point, that the economy is recovering strongly under his leadership and it opens the door wide for Mitt Romney to say, 'I've got a set of policies that could create faster job creation,'" says White who thinks it is going to be a "razor tight" election. "If [the unemployment number] stays where we are now, sort of bouncing around 100,000 or if we go back above, I think it is still a 50-50 race."

In a recent column, White does however note that the economies in most of the swing states are performing better than the national average (with the exception of Florida). But May's rise in the unemployment rate to 8.2% muddles this story and won't help Obama come election day, he says.

Without further ado, here are a few takeaways from the May report:

Spring Slowdown. Once again, the jobs figures testify to a slowing of growth in the spring. But the gloomy data extend beyond the headline payroll jobs figure. The economy is growing and demand continues to rise. But that's not translating into more work or significantly higher wages. The average workweek for private sector sectors fell in May by .1 hours — i.e., six minutes. Manufacturing, which has been a pocket of strength, showed signs of weakness. The manufacturing workweek fell .3 hours to 40.5, and factory overtime fell sharply. Hourly earnings crept up a smidgen in May, and over the past year have risen just 1.7 percent.

Labor Force Rises. There's an odd wrinkle here. The unemployment rate is derived from the household survey, in which BLS calls people and asks them about their employment status. The rate is calculated by dividing the number of people estimated to be unemployed into the size of the labor force. When the labor force shrinks, the unemployment rate can fall even if the number of people who say they're working doesn't rise. But that's not what happened this month. In May, according to the BLS, the labor force actually grew by 635,000 — which means a lot of people who had been sitting on the sidelines jumped back in. The number of people employed, according to the Household survey, rose by 422,000 in the month.

The Conservative Recovery Continues. Europe isn't the only area where austerity and reduced government spending are impacting employment. Virtually every month for the past few years, the private sector has added jobs while the public sector (local, state and federal government) has cut jobs. That continued in May. The private sector added 82,000 payroll jobs in May while government cut 13,000 positions. Since February 2010, the private sector has added 4.27 million jobs, while the public sector has cut 1.028 million jobs since May 2010.

The Trend Isn't Your Friend. There was another way in which the May report reversed recent trends. Every month, when it reports the figures, BLS goes back and revises the figures it had reported for the prior two months. For much of this recovery, the trend has been for BLS to discover jobs that hadn't been originally reported and revise the prior months' totals higher. But not this month. In May, BLS revised the gains for the two previous months lower. March's figure, originally reported as a 120,000 gain, had been revised upward to 154,000 in April, was revised back down to 143,000. The April figure, originally reported as a gain of 115,000, was revised to a gain of only 77,000.

Labor Market Frustration Rising. Despite the general trend of more job openings and declining first-time unemployment claims, this report shows that the jobs market softened in May. In addition to reporting the headline unemployment rate, BLS publishes alternative measures of labor force frustration — e.g., rates that include workers who have given up, or who are working part-time but would prefer to work full-time. BLS compiles all such measures in the U-6. After falling for much of the past year, it rose in May — to 14.8 percent.

Daniel Gross is economics editor at Yahoo! Finance.

Follow him on Twitter @grossdm; email him at grossdaniel11@yahoo.com.