Published June 11, 2012
A dramatic slowdown in Europe caused by credit issues there has brought the global economy to stall speed. European unemployment has reached all-time highs during the euro era. Manufacturing in the euro zone has fallen further. The Chinese economy has shown effects of a government-engineered slowdown. China has devalued the yuan, after allowing it to appreciate, in order to stimulate its economy.

All of these factors impact the U.S., where the rate of economic growth (gross domestic product) is less than 2 percent. U.S. factory output is near a 2½-year low, indicating the economy may be headed back toward recession.

The Institute for Supply Management reported that its business barometer fell 3.5 points to 52.7 in May; it was the third straight monthly drop and the lowest reading since September 2009 (readings above 50 reflect economic expansion). The consensus estimate was for the barometer to continue at 56; so the current reading reflected a significant weakening.

At the same time, the ISM production index fell 7.1 points in May to a neutral reading of 50, also the lowest since September 2009. This index is compiled from surveys of purchasing managers in the Chicago region.

Also, the Labor Department showed that the number of workers filing for unemployment benefits rose by 10,000, to 383,000, for the week that ended May 26.

On June 1, the jobs report from the Labor Department showed that non farm payroll grew by a lackluster 69,000 last month. The rate of unemployment ticked up to 8.2 percent. All of the growth came from private industry: 82,000 jobs were added, but governments cut payrolls by 13,000.

Compounding the already weak report, […]