Concerns about Jobs & Unemployment   (c) Mark Weber

The brutal truth about the Labor Department's June jobs report is that it offers strong evidence companies are still hacking away at their payroll costs -- slicing hours and chopping jobs.

Employers cut 467,000 jobs last month, according to the report.

The unemployment rate -- a measure of the percentage of workers who are unemployed and looking for work -- rose slightly to 9.5 percent, from 9.4 percent in May.

How are employees getting hammered?

Workers are seeing their livelihoods sliced and diced in numerous ways. For one, the average workweek hit 33.0 hours, a record low since the data were first collected 45 years ago. While hourly earnings have jumped 2.7 percent in the past year, that rise has been mitigated as companies have cut workers' hours -- so, weekly earnings have risen by just 0.9 percent.

Job losses in June were spread widely

Manufacturing lost another 136,000 jobs. Construction employment fell by 79,000. Professional and business services employment dropped by 118,000. Healthcare was the lone sector to add jobs in the month.

While the number of freshly unemployed workers has ticked down, the number of long-term unemployed is heading up. In fact, the Labor Department reports that 3 in 10 unemployed have been out of work for 27 weeks or more.

 

Is there any good news?

There is, indeed, a significant strip of silver lining in this report.

May job cuts total a revised 322,000 -- about half the total jobs employers had cut in each of the previous six months. The fact that June job cuts total 467,000 very likely signifies that workers are through the roughest patch. Also, the unemployment rate increased just 0.1 percentage points, which is less than many economists had expected.

One fact to note: Many of those temporary census jobs that had given the job numbers a boost in previous month are now ending. Employment in the federal government dropped by 49,000 this month, largely because of the census job layoffs.

What can we expect from Washington? Over the past couple of weeks, the White House has caught flak for its overly optimistic forecast for unemployment through the recession. In making the case for the stimulus package, President Obama used job creation and job destruction numbers from a commissioned study by two economists.

The study projected that without stimulus funds, unemployment would top out at 9 percent, and with a stimulus, it would smack 8 percent and begin ticking back down. While we will never know what the unemployment rate would have been without the $787 billion spending package, we know now that the rate will probably top at least 10 percent -- with the package.

The uglier than expected job market is leading some, like economist Paul Krugman, to champion a second stimulus package. However, much of the first stimulus package has not yet been spent. It's a multiyear plan.

What are the experts saying?

Richard Moody, chief economist of Forward Capital:

"So much for the second derivative test, at least when the subject is the June employment report. Total nonfarm employment fell by a larger than expected 467,000 jobs in June, with job losses broad-based amongst the private and public sectors.

The details of the June employment go from bad to worse -- aside from the unemployment rate rising to 9.5 percent (with the broader U6 measure rising to 16.5 percent) the median duration of unemployment rose sharply, while the share of the unemployed who have lost their jobs permanently rising to a record high 53.5 percent."

Ted Wieseman and David Greenlaw of Morgan Stanley Research:

"The smaller than anticipated uptick in the unemployment rate was largely attributable to an outright decline in the labor force. Indeed, we are finally starting to see signs of the long awaited pullback in the labor force participation rate.

Here is what we said in last month's Data Bulletin regarding an unexpected uptick in the participation rate: "This sort of rise in the participation rate is very unusual at this stage of the economic cycle -- typically, an increasing number of individuals become discouraged when employment prospects are bleak and they drop out of the labor force. We suspect that the recent rise in the labor force reflects statistical noise that will be reversed in coming months (note: the household survey is based on a very small sample size of about 0.06 percent and the data can be very volatile on a month-to-month basis). A pullback in the labor force should help to temper further increases in the unemployment rate."

However, even with some further slippage in labor force participation, it still looks like the jobless rate will easily breach the 10 percent threshold within the next few months."

Joshua Shapiro, chief U.S. economist at MFR:

"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."

 

 

Unemployment Reaches 9.5 Percent, Highest in 26 Years
Amanda Ruggeri

The Labor Department's job report this morning may not be surprising, but it's still disappointing: The unemployment rate rose in June to 9.5 percent, making it the worst in 26 years. The rise, from 9.4 percent in May, is slight. However, it keeps the economy on track to hit a 10 percent unemployment level by the end of the year, as analysts have predicted.

Making Sense of 'Cash for Clunkers'
Matthew Bandyk

With new-car sales slumping, automotive companies have been looking for ways to get consumers back into showrooms. Washington checked one item off car companies' wish list when it passed the Consumer Assistance to Recycle and Save Act of 2009 -- commonly known as 'Cash for Clunkers' ...

Nine Reasons the Economy is Not Getting Better
Mortimer B. Zuckerman

We are now looking at unemployment numbers that undermine any confidence that we might be nearing the bottom of the recession. The appropriate metaphor is not the green shoots of new growth. A better image is to look at the true total of jobless people as a prudent navigator looks at an iceberg

Would Second Stimulus Create Jobs?
Liz Wolgemuth

Americans are stumbling through a job market that is overwhelmed with supply, stripped of security, and skimmed of hours and benefits, and the unemployment rate has already climbed much higher than officials had forecast. So, the real question is, what could a second Obama administration stimulus do that the first one couldn't? To answer that, it's necessary to know how the first $787 billion package has disappointed.

Accurately Counting Stimulus Jobs Proving Tough
Amanda Ruggeri

As Americans become more skeptical of the administration's promise that the stimulus package will create or save 3.5 million jobs, there's an added frustration: Even if the $787 billion act is successful in creating work, Americans may never know. That's because counting the jobs involves estimating what would have happened without legislation, a slippery task even if the economy weren't so volatile.

Why No One Can Guess When Recovery will Occur
Paul A. Samuelson

Federal Reserve Chairmen Ben Bernanke glimpses a possible recovery by year end. He is a cautious scholar, backed by the best forecasters in the world at the Federal Reserve Board.

I would be a rash fool to quarrel with this quasi-optimistic view that by year end some stability will occur. You and I should hope that there will indeed be a glimmer of light at the end of the tunnel ahead. ...

Joseph Stiglitz:
Will Capitalism Survive Wall Street Apocalypse
Matthew Bandyk

A few days after writing about how the United States is not heading towards socialism, Joseph Stiglitz suggests that might not be true about the rest of the world. Stiglitz argues that the lesson many Third World nations might take from the financial crisis is that capitalism is fundamentally flawed.

Not Going to Be Economic Depression
Global Economic Viewpoint

Last week at the Milken Global Conference, three Noble Laureates in Economics sat down to discuss the global recession -- Gary Becker (Nobel Prize, 1992), Roger Myerson (Nobel Prize, 2007) and Myron Scholes (Nobel Prize 1997).

All three agreed that this is not going to be a depression and that the free-market economy is fundamentally healthy.

The Complex Case of Complexity
by Alvin and Heidi Toffler

In an important recent speech, months after the current financial crisis began, the chairman of the U.S. Federal Reserve Board, Ben Bernanke, placed partial blame for the catastrophe on "the sharp increase in the complexity of the financial products offered to consumers." Unfortunately, his description of the problem comes late and underestimates its importance. ...

Why are Bankers Still Being Treated as Beltway Royalty
by Arianna Huffington

President Obama said that he's been "sobered by the fact that change in Washington comes slow" and "humbled by the fact that the presidency is extraordinarily powerful, but we are just part of a much broader tapestry of American life and there are a lot of different power centers." Well, one of those different power centers -- the entrenched special interests that continue to call so many shots on Capitol Hill -- is the main reason change in D.C. comes so slow. But despite all that I know about the reform-killing power unleashed by the nexus of lobbying, campaign cash and legislation, I have been flabbergasted by the amount of behind-the-scenes influence recently being wielded by the banking lobby.

Recent Commentary on the Economic & Financial Crisis

 

(c) 2009 U.S. News & World Report

Receive iHaveNet.com on Politics & the Economy -- Enter your email address:



Delivered by FeedBurner