US jobs report: a cold blast of fear

US adds only 69,000 net jobs, the smallest gain in a year. Employers pull in their horns in the face of fears over the eurozone and worries about the US elections and the expiration of tax cuts.

The chill winds of fear and economic uncertainty, centered in Europe, are beginning to buffet the United States.

Employers are slowing down their hiring. Consumers have turned cautious. It's not the present state of affairs that's got them worried, it's what lies ahead: the potential breakup of the eurozone, the uncertainty around US elections, and the coming expiration of US tax cuts.

"We hear that up and down the food chain," says Jim John, chief operating officer of Beyond.com, an online career network based in King of Prussia, Pa., for employers and job-seekers. "Employers are pulling in their horns."

The latest employment report, released Friday, confirm the jitters. Employers added only 69,000 jobs in May, the Department of Labor reported, the smallest increase in a year and less than half what a consensus of economists had forecast. Employment gains for the two previous months were also adjusted downward by a combined 49,000 jobs. The unemployment rate ticked up from 8.1 percent to 8.2 percent.

For the past two months, economists have speculated that the weaker-than-expected jobs numbers were a kind of "payback" for the unusually strong employment gains in the winter, caused by unusually warm weather that boosted everything from construction work to car sales. Now, however, they're acknowledging that other factors are at work.

"It does now appear that the global slowdown, and events in Europe particularly, are beginning to have a more marked impact on the US economy," writes Paul Ashworth, chief US economist at Toronto-based Capital Economics, in an analysis of Friday's numbers.

"The latest figures cast doubt on whether the economy has enough momentum to achieve even the 2.2 percent growth rate we had expected for this year," writes Nigel Gault, chief US economist at IHS Global Insight in Lexington, Mass., in a research note. "Given the uncertainties over the eurozone crisis, emerging market growth, the US elections and the 'fiscal cliff,' there are plenty of reasons for businesses to stay cautious in their hiring plans, even if surging gasoline prices are for the moment no longer on the list of things to worry about."

The weakness in hiring appears to be centered among large companies, says Mr. John. Since March, Fortune 100 companies in retail, financial services, and communications began advertising fewer job openings on Beyond.com. The good news is that the number of jobs posted on the company's websites are more than double the level of a year ago. But the slowdown in job ads from big companies continues to intensify, a trend he expects to last for several more months.

"The [large] employers are saying: 'Let's wait and see,' " he says, as uncertainty mounts about Europe, the outcome of the US elections, and tax policy. That could lead to a mild recession. "We might talk ourselves into negative growth for a quarter or two," he cautions.

Even before the unemployment numbers came out, former Fed Chairman Alan Greenspan was sounding a cautious note. "There is a fear of the future," he told CNBC Friday, "and when you begin to try to disaggregate what's causing that, you come up with probably 40 percent of it is the fact that the economy is sagging."