The Joplin Globe, Joplin, MO

Business

July 6, 2012

US economy adds 80,000 jobs in another weak month

WASHINGTON — The American job machine has jammed. Again.

The economy added only 80,000 jobs in June, the government said Friday, erasing any doubt that the United States is in a summer slump for the third year in a row.

“Let’s just agree: This number stinks,” said Dan Greenhaus, chief global strategist at the investment firm BTIG.

It was the third consecutive month of weak job growth. From April through June, the economy produced an average of just 75,000 jobs a month, the weakest quarter since July through September 2010.

The unemployment rate stayed at 8.2 percent — a recession-level figure, even though the Great Recession has technically been over for three years.

The numbers could hurt President Barack Obama’s odds for re-election. Mitt Romney, the presumed Republican nominee, said they showed that Obama, in three and a half years on the job, had not “gotten America working again.”

“And the president is going to have to stand up and take responsibility for it,” Romney said in Wolfeboro, N.H. “This kick in the gut has got to end.”

Obama, on a two-day bus tour through the contested states of Ohio and Pennsylvania, focused on private companies, which added 84,000 jobs in June, and took a longer view of the economy recovery.

“Businesses have created 4.4 million new jobs over the past 28 months, including 500,000 new manufacturing jobs,” the president said. “That’s a step in the right direction.”

The Labor Department’s report on job creation and unemployment is the most closely watched monthly indicator of the U.S. economy. There are four reports remaining before Election Day, including one on the Friday before Americans vote.

No president since World War II has faced re-election with unemployment over 8 percent. It was 7.8 percent when Gerald Ford lost to Jimmy Carter in 1976. Ronald Reagan faced 7.2 percent unemployment in 1984 and trounced Walter Mondale.

Patrick Sims, director of research at the consulting firm Hamilton Place Strategies, said that “time has run out” for unemployment to fall below 8 percent by Election Day.

That would require an average of 219,000 jobs a month from July through October — more like the economy’s performance from January through March, when it averaged 226,000 per month.

Few economic analysts expect anything close to that.

“The labor market is treading water,” said Heidi Shierholz, an economist at the Economic Policy Institute. She called it an “ongoing, severe crisis for the American work force.”

The Labor Department report put investors in a sour mood.

The Dow Jones industrial average dropped 124 points. Industrial and materials companies, which depend on economic growth, were among the stocks that fell the most. The price of oil fell $2.77 per barrel to $84.45.

Money flowed instead into U.S. Treasurys, which investors perceive as safer than stocks when the economy is weakening. The yield on the benchmark 10-year U.S. Treasury note fell to 1.54 percent, from 1.59 percent on Thursday.

Investors were already worried about a debt crisis that has gripped Europe for almost three years and recent signals that the powerhouse economy of China is slowing.

Earlier this week, the European Central Bank and the central bank of China cut interest rates in hopes of encouraging people and businesses to borrow and spend money.

For American investors, however, the jobs report fell into an uncomfortable middle ground.

Federal Reserve Chairman Ben Bernanke promised earlier this month that the Federal Reserve would take additional steps to help the economy “if we’re not seeing a sustained improvement in the labor market.”

But some financial analysts said that the Labor Department report, which disappointing, was not weak enough to lock in further action by the Fed at its next meeting July 31 and Aug. 1.

The slowdown in job growth has been stark. From December through February, the economy spun off an average of 252,000 jobs a month, twice what is needed to keep up with population growth.

But the jobs generator started sputtering in March, when job growth slowed to 143,000.

At first, economists blamed the weather for warping the numbers. An unusually warm winter allowed construction companies and other employers to hire earlier in the year than usual, effectively stealing jobs from the spring, they said.

But weird weather could only explain so much, and the bad news kept coming: The economy added just 68,000 jobs in April and 77,000 in May. Those figures reflect revisions from earlier estimates of 77,000 for April and 69,000 for May.

June’s dud of a number made it clear that the economy has fallen into the same pattern it followed in 2010 and 2011: It gets off to a relatively fast start, then fades at midyear.

Offering some hope, the slowdowns in each of the two previous years lasted four months, and they were worse than this year’s has been.

From June through September 2010, the economy lost an average of 75,000 jobs per month. From May through August 2011, the economy added an average of 80,000 per month. This year, the four-month average gain since March is 92,000.

But the United States is still suffering the hangover of a financial crisis and the worst recession since the 1930s. The economy lost 8.8 million jobs during and after the recession. It has regained 3.8 million.

The economy isn’t growing fast enough to create jobs at a healthy clip. That is primarily because three traditional pistons of economic recovery aren’t firing the way they normally do:

— Consumer spending since the recession has been weaker than it was in any post-World War II recovery. Workers’ pay raises have been chewed up by rising prices. And households are trying to pay off the debt they ran up in the mid-2000s.

— Housing has been a dead weight on the economy for six years. Even record low mortgage rates haven’t helped much. Home prices have dropped 30 percent and $7 trillion worth of home equity has vanished since 2006.

— Government, which usually picks up the slack in the job market when the economy is weak, isn’t helping this time. Counting federal, state and local jobs, governments have cut 637,000 jobs since 2008. They have cut 49,000 since March.

In the first three months of this year, it appeared state and local government job losses were coming to an end, said Stuart Hoffman, chief economist at PNC Financial.

“That turned out to be a temporary halt,” he said. “Apparently, there’s no end in sight.”

The unemployment rate last month was unchanged from May. But a broader measure of weakness in the labor market, the so-called underemployment rate, deteriorated for the second straight month.

In June, 14.9 percent of Americans either were unemployed, had given up looking for work or had been forced to settle for part-time employment. The rate was 14.8 percent in May and 14.5 percent in April.

The Labor Department report left economists grasping for good news. Average hourly pay rose 6 cents in June, the biggest monthly gain in nearly a year. The average workweek grew. And companies hired 25,000 temporary workers, usually a sign that they were will hire full-time workers soon.

“That we latch on to these modest positives speaks to the bias of low expectations,” Greenhaus said.

Meantime, 12.7 million Americans remain unemployed.

When Deborah Masse, 49, lost a job in 2007, she had a job offer within six weeks. This time has been different. Since being laid off in October 2011, she has sent thousands of resumes and had several phone interviews but received no offers.

Masse, who lives in Stanton, Mich., with her husband and mother, has tried to make use of her free time. She has exercised more, learned some French and Spanish, and brushed up on her technological skills.

“If nothing else,” she said, “I will end up on Social Security, more fit, more intelligent and worldly and broke.”

 

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