US Payrolls Down Sharply In June
The unemployment rate, meanwhile, continued to creep toward double digits, rising to its highest level in over 25 years.
Nonfarm payrolls declined 467,000 in June, the U.S. Labor Department said Friday, a considerably greater decline than the 350,000 economists in a Dow Jones Newswires survey had expected.
Though monthly job losses have tapered off from their peaks of around 700,000 at the start of the year, the economy has still lost 6.5 million jobs since the recession started in December 2007.
The unemployment rate, calculated using a survey of households as opposed to companies, increased 0.1 percentage point to 9.5%, the highest level since August 1983.
Many Wall Street economists expect that rate to top 10% soon. Not only does the economy have to stop losing jobs before the jobless rate stabilizes, it actually has to add payrolls at a modest rate just to keep up with new entrants into the labor force.
"Unemployment rates, in my judgment, are likely to remain higher and linger longer than in recent recessions," Federal Reserve Governor Kevin Warsh said last month, adding that "jobless recovery" may become "a familiar and vexing refrain."
The Fed last week held the target fed funds rate for interbank lending near zero and repeated its pledge to keep rates "exceptionally low...for an extended period." San Francisco Fed President Janet Yellen affirmed that point Tuesday, saying the fed funds rate could stay near zero for some time.
According to Friday's report, when marginally attached and involuntary part-time workers are included, the rate of unemployed or underemployed workers hit 16.5% last month, up slightly from May.
The employment report is a sober reminder of the headwinds the U.S. faces even as other data suggest the recession may be nearing an end. The Institute for Supply Management manufacturing index increased in June from May, and though its level of 44.8 still signals a slight contraction in manufacturing, it is consistent with slight growth in the overall economy.
After plunging at rates near 6% at the end of 2008 and early 2009, at annual rates, economists think gross domestic product only fell around 1% or 2% in the second quarter, setting the stage for a resumption of tepid growth starting as soon as the current quarter.
Still, a jolt of consumption-driven adrenaline seems unlikely. Average hourly earnings were flat last month at $18.53. That was up just 2.7% from one year ago, a sign that inflation isn't a risk for the Fed. However, stagnant wages could also weigh on consumer spending, especially with gasoline prices on the rise.
According to Friday's report, hiring last month in manufacturing fell 136,000, bringing the total since the recession began to almost two million. Automobile employment accounted for 27,000 of that decline. Construction employment, meanwhile, was down 79,000.
Employment in the service sector -- the main source of U.S. jobs -- fell 244,000. Business and professional services companies shed 118,000 jobs, and financial-sector payrolls were down 27,000.
Retail trade cut 21,000 jobs and leisure and hospitality employment fell 18,000, reflecting weakness in consumer spending.
Temporary employment -- which economists consider a leading indicator -- fell by 37,600 last month. In May, that sector posted its best performance in many months, fueling some hope that the labor market was finding its footing.
Continuing a trend throughout the recession, education and health care added jobs last month. Those labor-intensive sectors, particularly health care, are shielded somewhat from trends in the overall economy.
The government shed 52,000, largely the result of layoffs of workers hired temporarily to prepare for the 2010 Census.
The average workweek was down 0.1 hour at 33 hours, a record low. A separate index of aggregate weekly hours fell 0.8 percentage point to 99.
---By Brian Blackstone, Dow Jones Newswires; 202-828-3397; email@example.com