June U.S. Employment

Jobs Downshift Extends Through Q2, Unemployment Rate Stagnant at 8.2 Percent

  • The June Payroll Employment Survey showed a weak gain of 80,000 jobs for the month.
  • The Unemployment Rate for June was unchanged at 8.2 percent.  
  • The average workweek ticked up to 34.5 hours. Average hourly earnings gained 0.3 percent in June.

The official Bureau of Labor Statistics count of payroll jobs created in June was a disappointing 80,000, and the unemployment rate was unchanged at 8.2 percent. Today’s jobs data confirms that the slowdown in hiring, first visible in March, has extended into the summer. Several factors have been blamed for the slowdown, including: (1) favorable weather early in the year which pulled economic activity forward, (2) high gasoline prices earlier in the year, (3) a weaker global macroeconomic environment with Europe in crisis and Asia cooler, (4) the approaching Fiscal Cliff, and (5) a structural change in labor market dynamics.  It is impossible to say definitively which factor or factors are holding down job growth, but it is fair to say that it looks like a little bit of everything. The danger that the U.S. economy now faces is a loss of momentum in the parts of the economy that have been noticeably improving, namely, energy, manufacturing, residential real estate, and automotive.  While the likelihood of a collapse in demand for these sectors now looks small, the likelihood of ongoing strong growth also looks smaller. So far, lack of hiring has not evolved into broad-based firing, but the longer we have weak hiring the more likely we see more firing. Given the headwinds from Europe and Asia, and the approaching Fiscal Cliff, plus the loss of momentum within the U.S. economy, it looks like the rest of this year will feel like more of the same…a sluggish march toward the Fiscal Cliff. We may yet see more aggressive monetary policy by the Federal Reserve this year, in the form of quantitative easing, but that is by no means a sure thing. The Fed is already engaged in extraordinary monetary policy with the pledge to keep the fed funds rate near zero through at least the end of 2014, and with the extension of Operation Twist through the remainder of this year. Also, the closer we get to Election Day the more the Fed will be exposed to criticism about political motivations if they engage in new policy actions. An increasing trend in the unemployment rate would certainly catch the Fed’s attention, boosting the likelihood of QE3, but we are not there yet.

No new jobs were added in resources and mining in June, as energy prices fell. Construction gained just 2,000 with help from residential projects. Manufacturing gained 11,000 jobs with ongoing help from transportation equipment. Wholesale trade was up 8,800 while retail trade lost 5,400 jobs. Transportation and warehousing declined by 2,200. Utilities gained 1,900. Information services fell by 8,000. Financial activities gained 5,000. Professional and business services did their part, adding 47,000 jobs in June. Education and health services were noticeably weak, gaining just 2,000 jobs for the month. Leisure and hospitality added 13,000 jobs on strength in restaurant hiring. The government sector continued to shed jobs, down 4,000 in June.

Market Reaction: U.S. equity prices are down. Treasury bond yields are falling. NYMEX crude is down to $84.63/barrel. The dollar is down versus the yen and up against the euro.

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