Job market not growing fast enough for big rebound
WASHINGTON
The jobless rate fell to 9.5 percent in June, still far too high
to signal a healthy economy. It came in slightly lower than the
month before only because more than a half-million people gave up
looking for work and were no longer counted as unemployed.
The private sector added just 83,000 jobs for the month. Looked
at from that angle or almost any other, from a teetering housing
market to falling factory orders, the recovery is limping along as
it enters the year's second half. And that is when the benefits of
most of the government's stimulus spending will begin to wear off.
The fate of the economy will hinge on whether it can stand on
its own. President Barack Obama acknowledged the slow pace of the
recovery and used the new jobs figures to argue for more stimulus
spending and extended unemployment benefits.
"We're not headed there fast enough for a lot of Americans,"
the president said. "We're not headed there fast enough for me,
either."
Overall, the nation's total payroll actually shrank last month
by 125,000, the first decline in six months, the Labor Department
said Friday. The loss reflected the end of 225,000 temporary jobs
helping the U.S. Census Bureau complete its 10-year head count.
The 83,000 jobs added by the private sector was a better
performance than in May, when private job creation nearly stalled.
But it fell far short of what the economy needs -- at least 200,000
jobs a month -- to bring down the unemployment rate.
Nobody, from Obama to Federal Reserve Chairman Ben Bernanke to
private economists, expects that anytime soon. And the government
has mostly exhausted its realistic options for nudging the economy
along faster.
Benchmark interest rates, which at low levels can encourage
borrowing to spur economic growth, are already near zero.
Republicans in Congress object to additional stimulus spending.
Unemployment is expected to stay above 9 percent through the
midterm elections in November. And the Fed predicts joblessness
could still be as high as 7.5 percent two years from now. Normal is
considered closer to 6 percent, and economists say it will probably
take until the middle of this decade to achieve that.
The jobless rate did come down in June from 9.7 percent the
month before. But that was mainly because 652,000 people abandoned
their job searches.
Even among Americans with secure jobs, confidence is fading. One
gauge of consumer confidence fell in June to about 53, down nearly
10 points in a single month. And it's well below the reading of 90
typically seen in a healthy economy.
Add to that jitters over Europe's debts, an edgy stock market
and cautious consumer spending, and the result is an economy
essentially moving sideways. It's no surprise that businesses are
reviewing their orders and seeing no reason to add to payrolls.
Few big companies say they plan to step up hiring in the second
half of the year. Most auto, airline and railroad companies, for
example, say they expect little or no job growth, blaming weak
demand.
One that does plan to hire, Chrysler Group LLC, expects to add
engineers and other workers as it updates its aging line of cars
and trucks. The company has announced 1,000 factory jobs in Detroit
to meet demand for the new Jeep Grand Cherokee SUV.
But airlines, including Delta and American, plan no staff
increases this year. And major railroads, which have furloughed
thousands since the recession, say they have no plans to add
employees in the coming months.
In June, manufacturers, the leisure and hospitality industries,
temporary staffing agencies, and education and health services
providers all added jobs. Retailers, construction firms and
financial service providers cut payrolls. So did state and local
governments, which are wrestling with budget shortfalls.
On Wall Street, stocks sagged yet again on the news. The Dow
Jones industrial average finished down 46 points, its seventh
consecutive losing session. The Dow lost more than 10 percent of
its value in the second quarter.
Trying to put a positive outlook on the report, Obama said it
showed that "we are headed in the right direction." At the same
time, he acknowledged there is a "great deal of work to do to
repair the economy and get the American people back to work."
His options are limited. Senate Republicans concerned about
record budget deficits this week blocked his efforts to extend
unemployment benefits for millions of out-of-work Americans.
"The two things that are growing fastest in this Democrat
economy are the size of the federal government and the crushing
burden of the national debt," said Senate Republican leader Mitch
McConnell of Kentucky, who led opposition to the extension.
All told, 14.6 million people were unemployed in June. An
additional 11.2 million have given up their job searches or are
working part-time but would prefer full-time work. That adds up to
nearly 26 million Americans, and an "underemployment" rate of
16.5 percent.
Eric Model, co-owner of Seal & Co., a shop in Summit, N.J., that
sells accessories and toys, said he has not replaced the two
back-office workers he let go two years ago. Not including a summer
hire, Model has four employees, plus himself.
"It would be nice to get some support," Model said. "But I
don't want to go out on a limb and hire somebody, anticipating
things will improve. I would rather run with low expenses."
Those Americans who still have jobs drew smaller paychecks last
month. Average hourly wages fell 2 cents to $22.53. Workers' hours
were cut, too. Those factors could dampen consumer spending in the
months ahead and further weaken the recovery.
It all threatens to perpetuate a vicious cycle for the economy.
"It is a Catch-22 situation," said Sung Won Sohn, professor at
California State University, Channel Islands. "Businesses are
reluctant to hire for fear of a 'double-dip' recession. Without
jobs, people are watchful of their spending, a danger to the
recovery."