Tags: june | payrolls | jobless | rate

Dismal Job Figures Put Pressure on Fed, Raise Hurdle for Obama

Friday, 06 July 2012 08:33 AM

U.S. employers hired at a dismal pace in June, raising pressure on the Federal Reserve to do more to boost the economy and dealing another setback to President Barack Obama's reelection bid.

The Labor Department said on Friday non-farm payrolls expanded by just 80,000 jobs in June, marking the third straight month employment has grown by fewer than 100,000 positions.

Job creation was too weak to bring down the country's lofty 8.2 percent unemployment rate, and the report fueled concerns that Europe's debt crisis was shifting the U.S. economy into low gear.

"We're just crawling forward here," said Nigel Gault, an economist at IHS Global Insight in Lexington, Massachusetts.

While Obama holds a narrow lead in most national polls, voters are often critical of his handling of the economy. Speaking at a campaign rally in Ohio, Obama acknowledged that the pace of job creation needs to pick up.

"It's still tough out there," he said.

Mitt Romney, Obama's Republican challenger, assailed the president for not doing enough to get people back to work.

"This kick in the gut has got to end," Romney told reporters in New Hampshire.

U.S. stocks retreated, while yields on U.S. government debt fell as traders ramped up bets the Fed would launch a third round of bond purchases to push already low borrowing costs down further. The dollar fell against the yen, but rose against the euro as investors sought a safe haven.


The Fed last month extended a program aimed at keeping long-term interest rates pressed down, and said it was prepared to do more to spur the economic recovery if needed.

Economists said the somber jobs report would push the central bank closer to a third round of so-called quantitative easing, or QE3. Still, some Wall Street analysts said it was probably not enough to lead to action at the Fed's next meeting, which ends Aug. 1.

"The Fed will wait for further confirmation of the slowing trend," said Michelle Meyer, an economist at Bank of America in New York.

Job creation averaged 75,000 per month during the second quarter, compared with an average increase of 226,000 in the first quarter. Economists estimate that roughly 125,000 jobs are needed each month just to hold the jobless rate steady.

Part of the recent slowdown could be because mild weather led companies to boost hiring in the winter at spring's expense.

But weakness in everything from manufacturing to retail sales suggests something more fundamental is at play, and the jobs data buttressed that view.

"It's very consistent with business leaders lacking conviction with what the future holds," said Brian Levitt, an economist at OppenheimerFunds in New York.

The manufacturing sector added 11,000 workers and construction employment edged up 2,000, the first gain since January and further evidence the long-depressed housing market is steadying.

However, hiring slowed sharply in the services industry, with retailers cutting 5,400 workers from their payrolls.

Overall, private-sector hiring was the weakest since August.


Debt woes have bogged down much of Europe, sending some countries into recession. The crisis in turn has dulled economic growth around the world, and central banks in China, the euro zone and Britain all eased monetary policy on Thursday.

Europe is not the only weight on the U.S. outlook. Washington plans enough belt-tightening at the start of 2013 to easily send the economy into recession if Congress and the White House can't seal a deal to avoid this "fiscal cliff."

Until recently, the United States had been a relative bright spot in the global economy, especially in manufacturing, and most economists still expect lackluster growth over the rest of 2012 rather than a slip toward recession.

Although jobs growth in June fell short of economists already subdued expectations for a 90,000 gain, the report did offer some hopeful signs.

Average hourly earnings rose 6 cents, the biggest gain in four months, and 156,000 workers entered the labor force.

In addition, a measure of total hours worked hit its highest level since November 2008. That means business is brisk enough for employers to demand more from their workers, even as they hold the line on hiring.

Temporary employment rose by the most in four months.

"I think a lot of that has to do with the uncertainty that everyone's feeling," said Joanie Ruge, an analyst at temporary staffing company Randstad Holdings US. "Employers are not feeling like things are stable."

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Friday, 06 July 2012 08:33 AM
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