U.S. Payrolls Grow at Slowest Pace in Nine Months as Jobless Rate Climbs
American employers added jobs at the slowest pace in nine months in June and the unemployment rate unexpectedly climbed to 9.2 percent, sending global stocks sliding on concern the world’s biggest economy is faltering.
Employers increased payrolls by 18,000 workers, less than the most pessimistic forecast in a Bloomberg News survey of economists, which called for growth of 105,000. The increase followed a 25,000 gain that was less than half the initial estimate. Hiring by companies was the weakest since May 2010.
“This is a very fragile state for the U.S. labor market,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston. “It suggests that the overall recovery remains somewhat tenuous.”
Treasuries climbed as the report called into question Federal Reserve forecasts for an economic rebound in the second half of the year and raised the odds of additional stimulus. The increase in unemployment also poses a fresh challenge for President Barack Obama as he seeks to keep the economy growing while also negotiating budget cuts with congressional leaders.
Estimates of the 85 economists surveyed by Bloomberg for overall payrolls ranged from increases of 40,000 to 175,000. (See related commentary.)
The Standard & Poor’s 500 Index fell 0.7 percent to 1,343.81 at the 4 p.m. close of trading in New York, after falling as much as 1.4 percent. The yield on the benchmark 10- year note dropped to 3.02 percent from 3.14 percent late yesterday.
Forecast to Hold
The unemployment rate, which rose in June to the highest level this year, was forecast to hold at 9.1 percent, according to the survey median. Estimates ranged from 8.9 percent to 9.2 percent.
Obama, speaking at the White House Rose Garden, said the report shows that “we still have a long way to go and a lot of work to do to give people the security and opportunity they deserve.”
The report adds urgency to talks on July 10, when Obama and eight congressional leaders from both parties will try again to find a compromise on cutting deficits and raising the government’s $14.3 trillion debt ceiling to head off a default on U.S. debt obligations in early August.
“The sooner that the markets know that the debt limit ceiling will have been raised and that we have a serious plan to deal with our debt and deficit, the sooner that we give our businesses the certainty that they will need in order to make additional investments to grow and hire,” Obama said.
Japan Earthquake
Fed officials have said the slowdown in economic growth in the first and second quarters partly reflected temporary factors. Manufacturers were hurt by supply disruptions in the aftermath of the earthquake in Japan, while a surge in gasoline expenses limited spending on non-essential items by American consumers.
“This increases the probability of another round of quantitative easing,” said Jason Schenker, president of Prestige Economics LLC in Austin, Texas, referring to large- scale asset purchases. “If additional stimulus is required, the Fed may be weighing its options.”
Companies reducing staff include Lockheed Martin Corp., the world’s largest defense contractor. Bethesda, Maryland-based Lockheed on June 30 said it plans to cut about 1,500 employees. McLean, Virginia-based Gannett Co., the publisher of 82 newspapers including USA Today, also announced last month it is eliminating about 700 jobs.
Some employers are more optimistic.
Buffet’s View
Billionaire Warren Buffett said he is wagering on continued economic expansion and doesn’t expect a second recession.
“I would bet very heavily against that,” Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., told Bloomberg Television’s Betty Liu on the “In the Loop” program after today’s data. “How fast the recovery will come, I don’t know. I see nothing that indicates any kind of a double dip.”
Berkshire Hathaway added about 3,000 jobs last year after cutting more than 20,000 positions in 2009. The Omaha, Nebraska- based company employed about 260,000 people at units from insurance and shipping to consumer goods and energy, Berkshire said in February.
Emmanuel Saujet, chief executive officer of New York-based International Cosmetics and Perfumes Inc., said his luxury cosmetics and fragrance company, which employs about 75 people in North America, is hiring to keep up with growing demand.
“We have probably expanded our full-time staff by about one-fifth since the beginning of the year,” Saujet said in a telephone interview.
Participation Rate
The jobless rate rose even as the participation rate declined to 64.1 percent, the lowest since March 1984. The Labor Department’s survey of households, used to calculate the unemployment rate, showed a 445,000 decrease in employment and a 173,000 increase in unemployment.
In that survey, the government calls 60,000 households and asks people if they are working or looking for a job. The survey includes the self-employed, farm workers and domestic workers. Those people are not counted in the establishment survey used to calculate the payroll figures.
Private hiring, which excludes government agencies, rose 57,000 last month after a 73,000 gain. It was projected to rise by 132,000, the survey showed.
Factory Payrolls
Factory payrolls climbed 6,000 in June after a 2,000 decline in the previous month.
Employment at service-providers increased 14,000 in June, the least since a decline in September. Construction employment fell 9,000 workers, while retailers added 5,200 workers.
Boyd Martin Construction LLC, a commercial construction company in Las Vegas, has cut its employment in half to 20 employees from 40 in 2006 as demand for all types of work has waned.
“When housing went away it took away a chunk of the entire economy and that has affected the entire construction sector,” said owner Boyd Martin, 48.
Government payrolls declined by 39,000 in June, the eighth straight decrease. Employment at state and local governments fell 25,000.
Average hourly earnings dropped 1 cent to $22.99, today’s report showed. The average work week for all workers decreased to 34.3 hours, from 34.4 hours the prior month.
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 16.2 percent from 15.8 percent.
Temporary Workers
The number of temporary workers decreased 12,000. Payrolls at temporary-help agencies often slow as companies seeing a steady increase in demand take on permanent staff.
Recent figures had signaled the economy was starting to perk up after slowing in the first half of the year. An Institute for Supply Management report last week showed manufacturing unexpectedly accelerated in June.
There are other bright signs. Consumer borrowing in the U.S. rose in May for the eighth straight month, led by a boost in credit card use and student loans, a Fed report today showed.
Credit increased by $5.08 billion after a revised $5.67 billion gain in April. Economists projected a $4 billion increase, according to the median forecast in a Bloomberg survey.
Policy makers “expect the unemployment rate to continue to decline but the pace of progress remains frustratingly slow,” Fed Chairman Ben S. Bernanke said at a news conference after the central bank’s June 21-22 monetary policy meeting.
Growth Slows
The economy expanded at a 1.9 percent annual rate in the first three months of the year, and economists surveyed by Bloomberg from June 28 to July 7 forecast second-quarter growth of 2 percent. In the final three months of 2010, the economy grew 3.1 percent.
Lack of faster progress in the labor market and in the economic recovery, which started in June 2009, has taken a toll on Obama’s approval ratings. Since he took office in January 2009, unemployment has increased from 7.8 percent and the economy has lost 2.5 million jobs.
By a 44 percent to 34 percent margin, Americans say they believe they are worse off than when Obama took office, according to a Bloomberg National Poll conducted June 17-20.
To contact the reporter on this story: Shobhana Chandra in Washington at schandra1@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
U.S. Payrolls Rose 18,000 in June; Jobless Rate Climbed to 9
Ken James/Bloomberg
Workers unload boxes of jelly bean flavors to make an assorted variety at the Jelly Belly Candy Co. manufacturing facility in Fairfield, California.
Workers unload boxes of jelly bean flavors to make an assorted variety at the Jelly Belly Candy Co. manufacturing facility in Fairfield, California. Photographer: Ken James/Bloomberg
July 8 (Bloomberg) -- Warren Buffett, chief executive officer of Berkshire Hathaway Inc., Anthony Crescenzi, executive vice president and strategist at Pacific Investment Management Co., and Ethan Harris, head of developed-markets economic research at Bank of America Merrill Lynch, offer their views on the U.S. employment report for June and the outlook for the labor market and economy. This report also contains comments from John Silvia, chief economist at Wells Fargo Securities LLC; Maury Harris, chief economist at UBS Securities LLC; Scott Brown, chief economist at Raymond James & Associates Inc.; Edward Lazear, a professor at Stanford University and former economic adviser to President George W. Bush, and David Blanchflower, a professor at Dartmouth College and Bloomberg Television contributing editor. (Source: Bloomberg)
July 8 (Bloomberg) -- U.S. Secretary of Labor Hilda Solis discusses the June jobs report and the outlook for the U.S. economy. U.S. employers added 18,000 workers in June, less than forecast and the fewest in nine months, while the unemployment rate unexpectedly climbed to 9.2 percent. The median estimate in a Bloomberg News survey called for a June gain of 105,000. Solis speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)
July 8 (Bloomberg) -- Bloomberg economist Joseph Brusuelas talks about the June U.S. employment report released today, challenges facing the labor force and U.S. economic policy. Employers added 18,000 workers last month, following a 25,000 gain in May that was less than half the rise initially estimated, Labor Department figures showed. The unemployment rate unexpectedly climbed to 9.2 percent, the highest level this year. Brusuelas speaks with Lisa Murphy on Bloomberg Television's "Fast Forward." (Source: Bloomberg)
July 8 (Bloomberg) -- Anthony Crescenzi, executive vice president and strategist at Pacific Investment Management Co., talks about the June U.S. employment report and the outlook for the economy. American employers added jobs at the slowest pace in nine months in June and the unemployment rate unexpectedly climbed to 9.2 percent, sending global stocks tumbling on concern the world’s biggest economy is faltering. (Source: Bloomberg)
July 8 (Bloomberg) -- David Rosenberg, chief economist at Gluskin Sheff & Associates, talks about the June U.S. employment report and the outlook for the economy. Rosenberg speaks with Matt Miller and Julie Hyman on Bloomberg Television's "Street Smart." (Source: Bloomberg)
July 8 (Bloomberg) -- Michael Whalen, chief executive officer of Heart of America Group, talks about the U.S. jobs report for June and the impact of banking regulation on business loans and hiring. American employers added jobs at the slowest pace in nine months in June and the unemployment rate unexpectedly climbed to 9.2 percent. Whalen speaks with Mark Crumpton on Bloomberg Television's "Bottom Line." (Source: Bloomberg)
July 8 (Bloomberg) -- Edward Lazear, a professor at Stanford University and former economic adviser to President George W. Bush, talks about President Barack Obama's economic policies and the U.S. labor market. He speaks with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
July 8 (Bloomberg) -- Mark Greene, chief executive officer of Fair Isaac Corp., discusses the June U.S. jobs report released today and the outlook for the housing market and consumer confidence. Employers added 18,000 workers last month, following a 25,000 gain in May that was less than half the rise initially estimated, Labor Department figures showed. The unemployment rate unexpectedly climbed to 9.2 percent, the highest level this year. Greene speaks on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg)
July 8 (Bloomberg) -- Maury Harris, chief economist at UBS Securities, and John Silvia, chief economist at Well Fargo Securities LLC, talk about today's report showing American employers added jobs at the slowest pace in nine months in June. Employers increased payrolls by 18,000 workers, less than the most pessimistic forecast in a Bloomberg News survey of economists, which called for growth of 105,000. Harris and Silvia speak with Tom Keene on Bloomberg Television's "Surveillance Midday." (Source: Bloomberg)
July 8 (Bloomberg) -- Brian Wesbury, chief economist at First Trust Portfolios LP, talks about the June U.S. employment report released today. U.S. employers added 18,000 workers last month, following a 25,000 gain in May that was less than half the rise initially estimated, Labor Department figures showed. The unemployment rate unexpectedly climbed to 9.2 percent, the highest level this year. Wesbury speaks with Deirdre Bolton, Dominic Chu and Sara Eisen on Bloomberg Television's "In the Loop" (Source: Bloomberg)
July 8 (Bloomberg) -- Warren Buffett, chief executive officer of Berkshire Hathaway Inc., talks about the outlook for the U.S. housing market and employment. Buffett, speaking with Betty Liu on Bloomberg Television's "In the Loop," also discusses President Barack Obama's policies and continued negotiations on a U.S. deficit plan. The speak from the Allen & Co. conference in Sun Valley, Idaho. (This is an excerpt of the full interview. Source: Bloomberg)
June 22 (Bloomberg) -- Americans are growing more dissatisfied with President Barack Obama’s handling of the economy, and only 30 percent said they are certain to re-elect him, according to a Bloomberg National Poll conducted June 17-20. Fewer than a quarter of respondents see signs of improvement in the economy, and two-thirds say they believe the country is on the wrong track overall. Hans Nichols reports on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
July 8 (Bloomberg) -- Steve Conine, chairman of CSN Stores LLC, talks about the online home-furnishing retailer's hiring plans and growth outlook. Conine speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
July 8 (Bloomberg) -- Mike McKee reports on the outlook for Alabama's economy on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
July 8 (Bloomberg) -- Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC, discusses the June jobs report and the outlook for the U.S. economy. U.S. employers added 18,000 workers in June, less than forecast and the fewest in nine months, while the unemployment rate unexpectedly climbed to 9.2 percent, indicating a struggling labor market. LeBas speaks with Betty Liu on Bloomberg Television's "In the Loop." Warren Buffett, chairman and chief executive officer of Berkshire Hathaway Inc., also speaks. (Source: Bloomberg)
July 8 (Bloomberg) -- Laura Tyson, an economics professor at the University of California at Berkeley and a member of President Barack Obama's Council on Jobs and Competitiveness, talks about the June U.S. employment report released today, the economy and fiscal policy. Tyson speaks on Bloomberg Television's "InBusiness With Margaret Brennan." (Source: Bloomberg)
July 8 (Bloomberg) -- Al Hunt, executive editor at Bloomberg News, discusses President Barack Obama's reaction to today's June jobs report. Hunt, speaking on Bloomberg Television's "InBusiness With Margaret Brennan," also previews his interview with Wisconsin Republican Senator Ron Johnson, which airs this weekend on "Political Capital With Al Hunt." (Source: Bloomberg)
U.S. Payrolls Probably Picked Up in Sign Economy Rebounding
Chip Chipman/Bloomberg
Grace Erikson, a production manager for TCHO, monitors the time for chocolate molds to be processed at the company's production facility in San Francisco, California, U.S.
Grace Erikson, a production manager for TCHO, monitors the time for chocolate molds to be processed at the company's production facility in San Francisco, California, U.S. Photographer: Chip Chipman/Bloomberg
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