Weak U.S. Payrolls Sparks Rethink Among Economists
By Chris Cermak
WASHINGTON (MNI) - June's surprisingly weak U.S. payrolls numbers,
following on the heels of a depressing May, are turning talk of a soft
patch for some economists into fears of a more prolonged labor market
"One point does not make a trend, but two points do make a line,"
Guy Lebas, chief fixed income strategist for Janney Montgomery Scott
PLC, said in an interview with Market News International. "The line is
pointing towards fairly depressed labor markets. There's no reason to
expect after the last two months that jobs growth will pick up."
The slump in June caught all economic forecasters off guard. U.S.
firms added only 18,000 jobs on the month, according to the Labor
Department Friday, including just 53,000 in the private sector, the
lowest since May 2010. May's payroll figure was revised down to 25,000
from an already-weak 54,000.
The weakness was broad-based, with weak or negative growth recorded
in nearly every sector of the economy, including industries like health
care and education that had proven relatively robust even during the
That has left even the most optimistic of forecasters acknowledging
that, at the very least, the soft patch continues, pushing hopes of a
labor market rebound toward the end of this year.
The market consensus was for payrolls to increase by more than
100,000 in June. Francis Genereux, a senior economist with Desjardins
Group, said a return to the above-200,000 range witnessed at the start
of this year is now not likely until September.
"It was bad news," Genereux said of the June report, "but we still
think that the outlook will be better for employment for the next few
Temporary jobs, which declined for the third straight month, and
manufacturing are seen as two areas to watch for signs of which way
things will turn over the coming months. Labor force participation also
fell further to 64.1%, its lowest since 1984.
Manufacturing is still expected to strengthen as the supply-side
fallout from the Japanese earthquake eases and carmakers in particular
start ramping up production, but many economists had hoped for that
recovery to start in June. The sector added just 6,000 jobs after
shedding 5,000 jobs in May.
Scott Brown, chief economist with Raymond James, pointed to private
firms still adding an average 65,000 jobs over the last three months as
a relatively positive sign that the recovery is still struggling along,
even if at an unpredictable pace.
"It's all consistent with this idea that we're in a slow patch,"
Brown told MNI. "It doesn't change that view, but it doesn't do anything
to soothe the fears going forward."
Consumer confidence could take a further hit from June's jobs
report. Lebas forecast another drop in the Conference Board's six-month
expectations index, currently at 72.4, as one of the key casualties of
the ongoing slack in the labor market.
"I think it's going to take at this point a number of months of
consistent job growth before consumers and businesses really increase
their demand," Lebas said.
The Conference Board's separate employment trends index, due out
Monday for June, already fell back below 100 to 99.7 in May.
Negative government job growth is also likely to continue as
spending cutbacks continue on the state and federal level. The
government shed 39,000 jobs in June.
Republican Congressman Spencer Bachus also cited uncertainty
created by new federal regulations as a reason for the slowdown in jobs
growth, a trend he called "disheartening and unmistakable."
President Obama responded to the weak jobs numbers by calling on
Congress to push for more immediate relief for the labor market,
including more infrastructure spending to resuscitate a construction
sector still mired in a slump. Construction shed another 9,000 jobs in
-- Chris Cermak is a Washington reporter with Need to Know News
** Market News International Washington Bureau: 202-371-2121 **