story by Alex Kowalski
Employers in the U.S. hired fewer workers than forecast in June, showing the labor market is making scant progress toward reducing joblessness.
Payrolls rose 80,000 last month after a 77,000 increase in May, according to Labor Department figures released Friday (July 6). Economists projected a 100,000 gain, according to the median estimate in a Bloomberg News survey. The unemployment rate held at 8.2%. Private employment, which excludes government agencies, increased 84,000 in June, the weakest in 10 months.
Stocks fell on concern hiring has shifted into a lower gear, restricting consumer spending and leaving the economy more vulnerable to a global slowdown. The figures underscore concern among some Fed policy makers that growth isn’t fast enough to lower unemployment stuck above 8% since February 2009.
The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — increased to 14.9% from 14.8%.
Today’s report showed factory payrolls in the U.S. increased by 11,000, more than the survey forecast of a 7,000 increase and following a 9,000 increase in the previous month. Government payrolls decreased by 4,000.
In a bright spot for workers, average hourly earnings rose to $23.50 from $23.44 in the prior month, today’s report showed. The average work week for all workers climbed minutes to 34.5 hours, from 34.4 hours the prior month.
Employment at service providers added 67,000 workers after 98,000. Construction companies added 2,000 workers and retailers cut 5,400 jobs.
TEMP WORKER RISE
“The job market is soft,” said David Resler, chief economic adviser at Nomura Securities International Inc., who correctly forecast the payrolls gain. “I’d characterize our reaction as much the same way the Fed will react — not surprised but disappointed. It’s just not the kind of growth we need to see at this stage in the business cycle.”
Private payrolls, which exclude government agencies, climbed after a revised gain of 105,000 that was larger than initially reported. They were projected to advance by 106,000 in June, the survey showed. Last month’s change in private payrolls reflected a 2,000 increase in education and health services that was the smallest in almost two years.
The number of temporary workers increased 25,200 in June after an 18,600 rise in May.
“What we are seeing today from an income perspective is our economy is modestly adding jobs,” Robert Hull, chief financial officer at Lowe’s Cos., the second-largest U.S. home-improvement retailer, said at a June 26 consumer conference in Boston. “That’s the good news. The bad news is it’s not sufficient to have a material impact on the unemployment rate.”
POLITICS, EURO CONCERNS
The economy and jobs will play a major role in President Barack Obama’s bid for re-election. Only one president since World War II, Ronald Reagan, has stayed in office with a jobless rate above 6%. Reagan won a second term in 1984 with 7.2% unemployment in the month of the election; the rate had fallen almost three percentage points in the previous 18 months.
Uncertainty in U.S. about the government’s fiscal outlook may still be hampering hiring plans. Congress has yet to resolve the so-called fiscal cliff, which represents more than $600 billion in higher taxes and reductions in defense and other government programs in 2013 that will take place without action.
“It is pretty clear that a lot of what is slowing the economy down are fears of financial catastrophe and what’s going on in Europe,” Austan Goolsbee, former chairman of the White House Council of Economic Advisers under Obama, said on Bloomberg Television.
Across the Atlantic, joblessness in the 17-nation euro area rose to 11.1% in May, the highest in records that begin in 1995, from 11% a month earlier, data showed this week.
At the Fed, the slowdown in both economic and employment growth prompted officials to take additional steps to stimulate the expansion. The Federal Open Market Committee on June 20 extended Operation Twist to the end of the year. The program aims to push down long-term borrowing costs on everything from mortgages to car loans by extending the maturity of assets on the Fed’s balance sheet.
“There’s a lot of frustration among some of the FOMC members that we’ve just been kind of sliding along,” said Randall S. Kroszner, a professor at the University of Chicago’s Booth School of Business and a former Fed governor.
Policy makers last month also downgraded their outlook for jobs and growth, saying they anticipate the unemployment rate will average 8% to 8.2% in the fourth quarter of this year versus an April estimate of 7.8% to 8%.
“After a brighter start to the year, economic momentum has slowed in the last few months,” Federal Reserve Bank of New York President William C. Dudley said during a June 29 speech.