Well, we might as well get this out of the way now. The employment numbers were uniformly horrible. Let’s jump into this cesspool.
First the numbers. From the DOL, initial claims for unemployment insurance were down 16,000 to 614,000 while the four-week moving average declined 2,750 to 615,250. That, of course, is not the big news. That comes from the BLS and they reported that 467,000 jobs were lost in June. The unemployment rate stayed about the same at 9.5%. This is a major setback as it reverses a trend of declining rates of job losses. These charts from the BLS pretty much tell the story.
click to enlarge
This from the Curious Capitalist, who puts this recession in its awful perspective.
Here are the reactions of economists on the WSJ Real Time Economics Blog:
This was a very ugly labor market report, and there is no amount of lipstick that can improve its image. Indeed, not only does it suggest that the pace of job losses in the U.S. remains very high, it bucks the trend of four consecutive months of improvement in the pace of job losses. Moreover, with conditions in the U.S. economy continuing to be very weak, there is little to suggest that a turnaround in U.S. labor market conditions is on the horizon. –Millan L. B. Mulraine, TD Securities
Yes, the drop in payroll employment has moderated from the 700,000+ results reported over the winter when panic and paralysis was the order of the day. But, private sector job losses in excess of 400,000 this deep into a recession cannot be viewed as anything but terrible news. –Joshua Shapiro, MFR Inc.
The headline payroll drop overstates underlying job losses because of the 49,000 decline in federal employment, which was largely due to the layoff of temporary census workers (which boosted payrolls in April)… Nonetheless, the rate of private sector job losses is slowing (the peak rate of job losses was the November–February period) and we expect that trend to continue… We are encouraged that both the narrow and broad measures of unemployment rose only marginally in June and this, along with the slowing in the rate of private sector job losses, further suggests that the recession is drawing to a close. –RDQ Economics
The payroll number is very disappointing. We had hoped to see a third straight movement back towards the 200,000 or so implied by the level of jobless claims, but instead the gap widened again, suggesting gross hiring remains extremely weak. The deterioration from May was mostly in services… In short, labor market is still terrible; don’t be swayed by a small unemployment rate rise. Wages will soon be falling outright, a classic deflation signal. –Ian Shepherdson, High Frequency Economics
Services and construction accounted for most of the steeper declines with bigger layoffs prevalent across most industry groups. On a slightly less discouraging note, job losses in manufacturing were the smallest since last November. Excluding the motor vehicle industry, declines in manufacturing jobs have gotten progressively smaller for six straight months. –Nomura Global Economics
We have a suspicion that the influx of school leavers into the labor market may have been a factor as well, as the numbers finding jobs appear to have been lower than allowed for in the usual seasonal adjustments. The alternative household survey measure shows an 83,000 decline in employment among 16 to 19 year olds last month, while the unemployment rate for that age cohort jumped to 24.0%, from 22.7%. As a result, teenagers accounted for 22% of the 374,000 decline in household employment despite making up only 11% of the labor force. –Paul Ashworth, Capital Economics
The larger than expected decline in private payrolls reflected a quickened pace of job loss in sectors such as construction and temp help. Meanwhile, the decline in census-related jobs in the government sector appeared to be right in line with our expectation (-50,000). Also, it’s worth noting that employment at auto dealers fell only 9,000 during June and we are likely to see much sharper declines in this category over the course of coming months. –David Greenlaw, Morgan Stanley
Interestingly, the only areas that showed any growth in employment were the already bloated sectors of education and health care. As a nation we already spend too much, and employ too many people, in these industries. Our current economic problems will not be solved by hiring more teachers and medical technicians. Our ultimate recovery must be led by a resurgence in manufacturing, which according to today’s numbers, continues to spiral lower. –Peter Schiff, Euro Pacific Capital
The worst of the contraction may be behind us but the economy is still in consolidation and will be through year end. Specifically, the 467,000 decline in payroll jobs was about 100,000 more than the Street had been anticipating. The composition of the job loss was also well balanced with goods producing firms cutting staffing levels by 223,000 as service producing cut employment by 244,000. –Steven Ricchiuto, Mizuho Securities
Job losses and the weak average hourly wages data suggest weak consumer incomes and thereby consumer spending. The second half gain in GDP will be dominated by federal spending. The test will be if much of the transfer payments are saved, not spent. In the personal income data released last week you saw that most of the money was saved. –John Silvia, Wachovia Economics Group
The green shoots in the job market are hard to find. Businesses are determined to trim costs by cutting payrolls. Expecting sluggish recovery in demand in the foreseeable future, employers want to make sure that a sustained economic recovery is here before hiring. The job market will become the Achilles’ heel of the coming recovery. –Sung Won Sohn, Smith School of Business and Economics
The details of the June employment report show a distressing degree of slack in the labor markets and a significantly weaker track for personal income. These trends will continue over coming months, and the process of reversing them will be a lengthy one. –Richard F. Moody, Forward Capital
OK, we know employment is a lagging indicator and there have been some positive signs in other metrics so let’s not slit our wrists. At the same time, we are digging a hole that is so deep that crawling out of it is going to take years.
All of these people do have to find jobs again sometime and I suspect, as do many others, that the numbers understate the extent of the problem. There are a lot of people working for ten or twelve bucks an hour that used to make multiples of those numbers. That’s what you do to survive. So as we all probably know intuitively, the truth is worse than the picture the numbers paint.