Austerity bites this month as the government lays off another 39,000 workers and the private sector remains far too weak to shoulder the burden. This government simply does not understand the economic disease that is attacking the US economy yet we continue to think that we can copy Greece and grow our way out of a balance sheet recession via government cuts. Unfortunately, this month’s employment report shows that the private sector is even weaker than most presume. Not a good macro sign, but then again, this is just more of the same from the last few years. If we want to take one positive away from this it is that unit labor costs will remain low which means corporate margins are unlikely to collapse any time soon. In short, more pain for Main Street. Econoday has the details on this “abysmal” report:
“Today’s employment report is abysmal. We have had two months in a row of essentially no growth. Nonfarm payroll employment in June slowed to a crawl with an 18,000 gain, following a revised 25,000 rise in May, and revised 217,000 in April. The market median forecast was for a 105,000 boost. Also, the April and May revisions were down net 44,000. Once again, the government sector held down payroll numbers as private nonfarm payrolls outpaced the total with an increase of 57,000 in June, following a 73,000 advance in May. Analysts had projected a 125,000 gain in June.
Most major industries were little changed. Goods-producing jobs edged up 4,000, following a 3,000 rise in May. Manufacturing jobs rebounded 6,000 after a 2,000 dip in May. However, construction declined 9,000 after decreasing 4,000. Mining advanced 8,000, following 9,000 gain the prior month.
Growth in private service-providing jobs slowed to a rise of 53,000 after a 70,000 increase the prior month. Leading the increase in June was leisure & hospitality, up 34,000 with professional & technical services, up 24,000. Health care continued to trend upward with a 14,000 boost. On the downside, standouts were educational services, down 17,400; financial activities, down 15,000; and temp help, down 12,000.
The government sector shed another 39,000, following a 48,000 drop in May. This latest decrease was led by local government but declines were also seen at state and federal levels.
Average hourly earnings also slowed June, coming in at no change, following a 0.3 percent rise the prior month. The consensus forecast was for a 0.2 percent increase. The average workweek for all workers in June slipped to 34.3 hours from 34.4 the month before. The June figure came in lower than the market projection for 34.4 hours.
On a year-ago basis, overall payroll jobs in June improved to a still soft 0.8 percent from 0.6 percent the previous month.
From the household survey, the unemployment rate edged up to 9.2 percent from 9.1 percent in May. The consensus expected 9.0 percent.
The June jobs report reinvigorates the argument that the economy is in a soft patch. While a number of indicators have picked up strength, employment is key for the consumer sector to add to economic growth. On the news, equity futures dipped significantly, bond prices firmed, and crude oil declined.”