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Report Dampens Hope For Near-Term Jobs Growth

Graphic: U.S. Payrolls

If employment is going to improve in the second half of the year, as many economists had forecast, there was no hint of it when the Labor Department released June's employment report Friday.

"It's a very discouraging report. It's much worse than expected and it's really hard to see any silver lining," said Nigel Gault, chief U.S. economist at IHS Global Insight.

The department said hiring last month nearly ground to a halt, slowing to a pace not seen in nine months. The unemployment rate pushed up to 9.2 percent from 9.1 percent in May.


"We have been hoping for some improvement going into the second half of the year. We haven't seen it yet," Gault said.

President Obama, in a statement at the White House, said the latest report confirms that "we still have a long way to go and a lot of work to do.

"The problems in Greece and in Europe, along with uncertainty over whether the debt limit here in the United States will be raised, have also made businesses hesitant to invest more aggressively," he said.

The latest employment data indicate a continued slow and painful recovery from the worst economic downturn since the Great Depression. Unemployment has topped 8 percent for 29 months, the longest streak since the 1930s.

Only 18,000 net jobs were added in June, with 57,000 in the private sector barely offsetting the 39,000 cuts in government jobs at the federal, state and local levels. The number of jobs added in May was also revised down to 25,000.


"We had big declines in the government and only anemic gains in the private sector, so overall job creation is only just above the zero mark right now," Gault said.

June's disappointing report comes on the heels of slow job growth for April and May but follows stronger reports of an average of 215,000 jobs created for the previous three months.

The number of unemployed workers rose almost 175,000 to 14.1 million in June, pushing up the unemployment rate. The economy typically needs to add 250,000 jobs per month to bring the unemployment rate down.

Economists like Brian Wesbury of First Trust in Wheaton, Ill., think that temporary factors have, in part, forced some employers to pull back in June. High gas prices have cut into consumer spending, and supply-chain disruptions stemming from the Japan crisis slowed U.S. manufacturing production.

Manufacturing activity expanded in June at a faster pace than the previous month, according to the Institute for Supply Management. That suggests the parts shortage caused by the March 11 earthquake in Japan is beginning to abate.

"There was a major hit to industrial production in Japan. We also had a wicked tornado season here in the United States," he said. "When you combine those things, you see the impact on the data."

Gault is more skeptical.

We're getting a bit too far away from those tornadoes and the tsunami to be blaming the numbers on them.

"We're getting a bit too far away from those tornadoes and the tsunami to be blaming the numbers on them," he said, but "the massive run-up in commodity prices" in the first part of the year is still being felt.

There are signs that economy could improve in the second half of the year. Gas prices have come down since peaking in early May at a national average of nearly $4 per gallon. Prices averaged $3.59 a gallon nationwide on Friday, according to AAA.

Still, the government said last month that the economy grew only 1.9 percent in the January-March quarter. Analysts are expecting similarly weak growth in the April-June quarter.

The economy will grow at a 3.2 percent pace in final six months of the year, according to an Associated Press survey of 38 economists.

"There's nothing in this report that we can point to and grab on to. It was kind of weak all around. But I think people need to take this fact that we had a soft patch and that employment is a lagging indicator," Wesbury said.

Material from The Associated Press was used in this report

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