U.S. jobs barely rise, dousing hopes of revival

Non-farm payrolls rose only 18,000, well below expectations
By Lucia Mutikani
|hrreporter.com|Last Updated: 07/08/2011

WASHINGTON (Reuters) — United States employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dousing hopes the economy would regain momentum in the second half of the year.

Non-farm payrolls rose only 18,000, the weakest reading since September 2010, the Labor Department said, well below economists' expectations for a 90,000 rise.

The unemployment rate climbed to a six-month high of 9.2 per cent, even as jobseekers left the labour force in droves, from 9.1 per cent in May.

"The message on the economy is ongoing stagnation," said Pierre Ellis, senior economist at Decision Economics in New York. "Income growth is marginal so there's no indication of momentum."

U.S. stock index futures fell sharply on the data, while U.S. bond prices rose. The dollar rose against the euro.

The government revised April and May payrolls to show 44,000 fewer jobs created than previously reported.

The report shattered expectations the economy was starting to accelerate after a soft patch in the first half of the year. It could prompt calls for the Federal Reserve to consider further action to help the economy, but reserve officials have set a high bar.

The U.S. central bank wrapped up a $600-billion bond-buying program last week designed to spur lending and stimulate growth.

"This confirms our view that the Fed will continue to keep rates on hold into 2012 and if weak employment continues it will be pushed out even further," said Tom Porcelli, chief economist at RBC Capital Markets in New York.

Hopes were high the economy was starting to find firmer ground as motor vehicle manufacturers ramped up production and gasoline prices descended from their lofty levels.

Economic activity in the first six months of the year was dampened by rising commodity prices and supply chain disruptions following Japan's devastating earthquake in March 2011.

Signs the labour market is struggling is a major blow for the President Barack Obama's administration, which has struggled to get the economy to create enough jobs to absorb the 14.1 million unemployed Americans.

The economy is the top concern among voters and will feature prominently in Obama's bid for re-election next year. So far, the economy has regained only a fraction of the more than eight million jobs lost during the recession.

The economy needs to create between 125,000 and 150,000 new jobs per month just to absorb new labour force entrants.

The private sector added 57,000 last month, accounting for all the jobs created, with government employment shrinking 39,000 because of fiscal problems at local and state governments.

Details of the report showed widespread weakness, though factory payrolls rebounded 6,000 after contracting in May for the first time in seven months, with the recovery reflecting a step-up in motor vehicle production.

Construction employment fell 9,000 last month after declining 4,000 in May. Government employment declined for an eighth straight month as municipalities and state governments continued to wield the axe to balance their budgets.

The report also showed the average workweek fell to 34.3 hours from 34.4 hours. Employers have been reluctant to extend hours because of the uncertainty surrounding the recovery.

Average hourly earnings slipped one penny, more evidence that wage-driven inflation is not a risk.

Add Comment

  • *
  • *
  • *
  • *