06/01/2012 02:20 pm ET

Jobs Report Puts World On Recession Watch

Get ready: The ugly May jobs report will revive talk of another recession. Don't believe it. Yet.

The "R" word got dropped all over Twitter within minutes of the news that the economy had added just 69,000 jobs in May and that the unemployment rate had risen to 8.2 percent. Famed economic Cassandra Nouriel Roubini did his thing, tweeting: "From anemic sub-par growth to stall speed to double-dip recession? It is possible and 2013 looks worse with a serious fiscal cliff and drag." Pedro Da Costa of Reuters tweeted simply: "I'll say it: recession."

Lakshman Achuthan, of the Economic Cycle Research Institute, who has been calling for a recession for several months now and saying we will know by the end of June whether we are in one or not, was traveling and not available to comment. But we can guess that he is not exactly backing down from his recession call today, after reiterating it twice in just the past month.

Financial markets appear to be on recession watch already. The Dow Jones Industrial Average tumbled more than 200 points on Friday, giving up all of its gains for the year. It has shed nearly 9 percent since the start of May. Crude-oil prices are down 24 percent since February. The bond market is essentially warning of the End Of Days, with 10-year Treasury yields tumbling below 1.5 percent for the first time in recorded history.

In a note to clients after the report was released, Dan Greenhaus, chief global strategist at New York brokerage firm BTIG, said the news was bad enough to make him consider reviving a recession warning he made last October.

But in an interview with The Huffington Post, Greenhaus said he wasn't on full recession alert just yet.

"My belief is that part of this is weather related," he said. "But I'm growing increasingly worried here."

The recent slowdown in job growth, Greenhaus and other economists said, could be payback for freakishly warm winter weather, when hiring may have been stronger than usual. There's also a theory out there that the deep financial crisis in 2008 may have messed up seasonal adjustments for economic data in recent years, making winters look stronger than they really are and springs look weaker.

And the job report wasn't that bad, taken in context, Greenhaus noted. Nonfarm payroll jobs have grown by an average of 165,000 per month in the first five months of 2012, down only slightly from an average of 176,000 per month in the first five months of 2011.

Though unemployment rose in May, the household survey that produces the unemployment rate showed that 442,000 people got jobs last month. Unemployment rose simply because the labor force grew more than the number of employed people -- also possibly a positive sign. Remember how everybody freaked out last month when the labor force shrank and pulled unemployment lower in April? Maybe we should take heart that the opposite happened in May.

Meanwhile, other key economic numbers released on Friday were not as scary. The Institute for Supply Management said its manufacturing index for May fell only slightly, to 53.5 from 54.8. Anything over 50 indicates expansion in the sector. All of the recessions since 1973 have begun when the ISM index was below 50, and only 2 of the 11 recessions since 1948 have begun with the ISM over 50. In other words, May's ISM reading of 53.5 suggests that we are not in a recession.

"The recession case still looks flimsy to us," Michael Darda, chief economist at research and trading firm MKM Partners, said in a note. "Jobless claims are hanging in there, and the [ISM index] for May showed solid internals."

And as for recessions, they don't just up and happen. Economies typically must be shocked into recession. Last year the global economy suffered a series of shocks, including the Japanese earthquake and nuclear crisis, the U.S. credit-rating downgrade and the ongoing European debt crisis, and the U.S. still managed to avoid a recession.

That said, growth is clearly slowing around the world. The European debt crisis is nearing a potentially messy endgame, affecting financial markets and business confidence. It also seems to be dragging down China, one of the world's fastest-growing economies. At the same time, the other fast-growing emerging markets of India and Brazil are slowing down, as is Japan.

The U.S. may not be in a recession, but much of the rest of the world may soon be. And the U.S. is growing too slowly, which leaves it vulnerable to shocks.

"This is the beginning of the slowdown, which we expect to translate to only 1.0% GDP growth" by the fourth quarter, Bank of America Merrill Lynch economist Michelle Meyer wrote on Friday. One percent GDP growth may not exactly qualify as a full-on recession, but it makes a recession more likely, particularly with the "fiscal cliff" of tax increases and spending cuts approaching at the end of the year.

This means we may be on recession watch for the foreseeable future -- or at least until the next jobs report.