Economists and others weigh in on the tepid rise in payrolls amid a increase in the unemployment rate.
–Overall the June Employment Report was quite disappointing , with basically no positive offsets to the poor headline results. The best we can say is that other data have shown better signs in recent weeks, including jobless claims, chain-store sales, gasoline prices, and auto production. Nevertheless, the weak trend in payroll employment indicates some downside risk to our second half growth views. –Goldman Sachs
– Ugly. I mean really ugly., The June employment data were stunningly weak. Job gains were the lowest since last September when payrolls declined. Given the measurement error, you cannot even say that any new hiring occurred in June. Worse, the April and May gains were revised downward indicating that smaller businesses are not out there hiring either. That is consistent with the surveys coming out of the National Federation of Independent Business and is a discouraging trend since that is where most of the hiring occurs. Interestingly, there were almost no sectors that showed any strong gains but only a few industries cut sharply. –Naroff Economic Advisors
– Nonfarm establishments added a scant 18,000 workers to their payrolls in June with private sector firms adding 57,000 while governments cut staff by 39,000. As if these markedly weaker than expected news isn’t enough, the weak May data were revised down. The exception to the overarching gloom in the headline numbers was the manufacturing sector, which added 6,000 workers after cutting payrolls by less in May than previously reported. Weakness permeated most industries including private sector education, which fell 17,000, the biggest cutback in nearly two years. Apart from manufacturing, two industries — leisure and hospitality and retail — behaved roughly as expected reversing some or all of the May declines. –David Resler, Nomura Global Economics
– The unemployment rate rose for the third month in a row to 9.2% in June from 9.1% in May – up [0.4 percentage point] in three months and the highest since November 2010. Clearly, the large drop in the unemployment rate heading into the year was overdone. Moreover, the details behind the rise in the unemployment rate were poor. Household employment fell 445,000 in June, the biggest one-month decline since December 2009. –Ethan Harris, Bank of America Merrill Lynch
–Neither indicator shows a pace of job creation that is fast enough to reduce the nation’s unemployment rate very quickly. If the jobless rate were 5%, this news would be tolerable. But when unemployment exceeds 9%, it should be unacceptable. Even taking a rosy view of employment gains over the past 6 or 12 months, it will be many years before the nation eliminates the current shortfall in jobs. To bring the adult employment rate back to its pre-recession level, we would need to add about 11 million new jobs. At the pace of job growth we have seen since the start of the year, that task may take decades. –Gary Burtless, Brookings Institution
–As a result of the latest exodus from the labor force, the participation rate fell to a 27-year low of 64.1%. The employment-to-population ratio fell to 58.2, from 58.4, matching the lows set in December 2009 and then November 2010. The upshot is that exactly two years after the recovery began, broad labor market conditions haven’t improved at all.–Paul Ashworth, Capital Economics
–Moody’s Analytics has revised its expectations through the end of this year downward, and now see monthly payroll gains remaining below the 200,000 required to bring down the unemployment rate. Employment gains are expected to accelerate and gain momentum in 2012. –Sophia Koropeckyj, Moody’s Economy.com
–We can see no silver lining in this employment report, which is weak, weak, weak. The three-month growth in employment is now in line with the last 12 months and the last two months have been significantly weaker. The unemployment rate edged up in June but the broader rate (including discouraged job seekers and forced part-time) surged to 16.2% from 15.8%. Total hours worked slowed and fell in manufacturing over the last three months. It is hard to excuse this report on supply-chain disruptions and it suggests that growth momentum evaporated as the second quarter drew to a close. –RDQ Economics
– Industry trends generally supported the overall headline, with no particular private sector contributing an outsized boost or hindrance to the overall results. Temporary help hiring declined for the third consecutive month, and while there are various seasonal summer factors at play, the declines suggest that firms are particularly downbeat about their hiring prospects. –Guy LeBas, Janney Montgomery Scott
– There is certainly no way to view the June report as anything but weak, and the fact that it follows on the heels of an equally soft May report is certainly disconcerting. That being said, we know that a number of temporary factors that held back the economy are likely to reverse in the third quarter and will help to boost growth. Currently, it seems that business sentiment is resting on a knife’s edge, with a few weak (strong) reports enough to push sentiment, and business decisions on hiring, into negative (positive) territory. The June payrolls report is jarring, but we continue to think that the economic data are set to improve in the third quarter, especially in the factory sector. –RBS
– Supply-chain disruptions and bad weather are unconvincing as explanations for the extent of the weakness. A delayed response to the cumulative impact of surging commodity costs during the first half of the year is a more plausible explanation, but this report has dashed hopes that the economy was about to accelerate again now that those costs have eased back. –Nigel Gault, IHS Global Insight
– More aggressive hiring is the key missing ingredient of our baseline forecast of a “self-sustaining” economic expansion in 2011-2012 that has been delayed but not derailed by higher energy prices, the disaster in Japan and sovereign debt problems in parts of southern Europe. As the impact of the former two partly reverse, the economy will climb out of its muddy “soft spot” to firmer ground in the latter half of this year and keep climbing in 2012. –Stuart Hoffman, PNC
–Companies continue to focus on cost cutting instead of expanding their business in the search of profits. This confirms that CEO’s have no confidence in the sustainability of the recovery/expansion. –Steven Ricchiuto, Mizuho Securities
–The economy still faces significant headwinds. The turbulence in the Middle East could cause gasoline prices to shoot up again. The housing is in a double-dip. The Euro zone is not stable affecting U.S. financial markets and exports. The developing real estate bubble in China, the primary locomotive of the world economy, is another worry. The recovery path for the economy will be volatile and rocky. –Sung Won Sohn, Smith School of Business and Economics
- If the May employment report was “alarmingly weak,” as I described it a month ago, then the June release is an unmitigated disaster. Every facet of the data is sharply worse than anticipated… And yet, while I was quite concerned about the economy after the May release, I am less worried today. Perhaps I have lost my marbles, but I look at this report and simply conclude that it is not to be taken at face value. To be absolutely clear, I have no doubt that the labor market softened over the last two months relative to the healthy readings seen earlier in the year. And, as I discussed in my preview of today’s report, it will undoubtedly take several months to get back to a happy place, as businesses, once they move into “caution mode,” take a little bit of time to regain their confidence. Having said all of that, there is too much statistical and anecdotal evidence to the contrary to believe, as these data suggest, that the labor market has essentially ground to a halt. A frustratingly slow recovery to be sure, but I do not believe that conditions are as bad as these data would indicate. –Stephen Stanley, Pierpoint Securities
– There is no sugar coating the June employment report and based on the forward looking data we collect there are likely to be more disappointing payroll numbers in the next several months. What the data showed for June is a drop in the demand for labor – in terms of hours worked, the number of people needed, and the number of people unemployed. –Steven Blitz, ITG Investment Research
– An unusually aggressive seasonal [adjustment] may explain at least some of the payroll weakness. The June seasonal is always negative (that is, the level of adjusted payrolls is less than the unadjusted level) to offset hiring for summer jobs. Last June, the SA-NSA spread in private payrolls was -920,000; this year it was -1.084,000.–Ian Shepherdson, High Frequency Economics
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