Job losses rise in June, ending months of improvement
WASHINGTON (MCT) — Worse-than-expected unemployment numbers and an uptick in the jobless rate renewed fears Thursday that the U.S. economy remains very fragile and recovery is elusive.
“The economy is moving in the right direction, but painfully slowly,” said Mark Zandi, the chief economist for forecaster Moody’s Economy.com in West Chester, Pa.
Employers shed 467,000 jobs in June and the unemployment rate rose another tenth of a percentage point to a 26-year high of 9.5 percent, the Labor Department reported. Mainstream economic forecasts had projected job losses of around 350,000 — about the same as May’s initial reading — so the June report from the Bureau of Labor Statistics dampened hopes that the U.S. economy was getting back on its feet. June broke a four-month streak of improving employment reports.
“Job losses were widespread across the major industry sectors, with large declines occurring in manufacturing, professional and business services, and construction,” the BLS said Thursday in its monthly Employment Situation Summary.
As if Americans needed the grim reminder, the BLS said that since the recession began in December 2007, “the number of unemployed persons has increased by 7.2 million, and the unemployment rate has risen by 4.6 percentage points.”
The Economic Policy Institute, a liberal research organization, said that Thursday’s jobs report marked a grim watershed event. The entire growth in jobs over the last nine years now has been wiped out; the economy has fewer jobs than it had in May 2000, the institute said. The labor force, however, has grown by 12.5 million workers since then.
“This is the only recession since the Great Depression to wipe out all jobs growth from the previous business cycle, a devastating benchmark for the workers of this country and a testament to both the enormity of the current crisis and to the extreme weakness of jobs growth from 2000 to 2007,” Heidi Shierholz, an economist with the institute, wrote in an analysis of the jobs report.
Wall Street frowned on the surprise. The Dow Jones industrial average closed off 233.32 points at 8,280.74. The S&P 500 was down 26.91 points to 896.42, and the Nasdaq lost 49.20 points at 1,796.52.
Adding to the sense of gloom in Thursday’s report, BLS statisticians confirmed that average hourly pay was flat in June and average weekly pay fell 1.85 percent. The average workweek for most workers fell by a tenth of a percentage point to 33 hours, the lowest level since authorities began keeping records in 1964.
Average earnings and hours worked are important harbingers of economic activity. Consumption drives about two-thirds of U.S. economic activity, and workers who work less and earn less tend to spend less, too.
These trends argue against the impression that the economy is on the verge of recovering.
“A significant threat to this script is the stalling-out of wage growth. If wages begin falling, debt loads will grow heavier, resulting in more defaults and renewed problems for the financial system,” Zandi said. “Policymakers must remain very aggressive in ensuring this doesn’t happen.”
Thursday’s numbers point to a long slog back for the economy.
“With jobs rapidly plummeting, we can anticipate further job erosion. With wage growth essentially nil for two months, we can anticipate a weak recovery,” said Larry Mishel, who heads the Economic Policy Institute. “Unfortunately, this administration was thrown into an abyss not fully anticipated and now must confront this employment crisis.”
Alan Levenson, the chief economist for investment manager T. Rowe Price, warned in a research note that “flat wages point up risks that recovery stalls.”
Although June’s numbers were worse than expected, the trend in recent months still points to moderating job losses. From April through June, the monthly average job losses were 436,000, an improvement from the monthly average from November through March of 670,000.
“This is still a diminution, but obviously we wish it had been better,” Christina Romer, the head of the White House Council of Economic Advisers, said on CNBC television, adding later that “my hope and expectation is that we go back to that pattern.”
BLS statisticians also revised the April and May reports, saying that layoffs in May were smaller than first thought: 322,000, rather than the reported 345,000. For April, however, the job cuts were deeper: 519,000, instead of the 504,000 initially reported.
Leading the job-losing sectors in June was manufacturing, which shed 136,000 jobs. Construction companies trimmed another 79,000 positions. In a bad harbinger for housing, the business and professional services sector, which comprises white-collar workers who are more likely than not to be homeowners, lost 118,000 positions. Retailers axed another 21,000 jobs, while education and leisure and hospitality slimmed down by 18,000 posts. In a surprise, government employment fell by 52,000, and the only sector with a net addition of jobs was education and health services at 34,000.
