Dismal ideas

1 June 2012 By Martin Hutchinson

With only 69,000 jobs created in May on top of weaker growth than thought, the dismal science is on trial. Keynesian and monetary stimulus theories, for instance, are losing credibility. The winner for now is Reinhart and Rogoff’s thesis that excessive debt stunts growth.

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U.S. nonfarm employment increased by 69,000 on a seasonally adjusted basis in May, according to a June 1 release from the Bureau of Labor Statistics. The unemployment rate rose by 0.1 percentage point to 8.2 percent, while the labor force participation rate rose by 0.2 percentage point to 63.8 percent. Job gains in March were revised downward by 11,000 and those in April by 38,000.

The second estimate of first-quarter U.S. GDP growth, announced by the Bureau of Economic Analysis on May 31, was revised down to a 1.9 percent annualized pace from 2.2 percent.

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