By BusinessWeek and Standard & Poor's staff
The June employment report was bad, but by the market's reckoning, it could have been a lot worse.
According to a Labor Dept. report released on July 3, U.S. payroll employment fell an additional 62,000 in June, the sixth consecutive decline in jobs, while the unemployment rate held constant at 5.5%. The results were slightly worse than the market consensus for a 58,000 payroll drop and a 5.4% unemployment rate.
May's decline in payrolls was revised upward to 62,000, from –49,000 previously. There was a net –52,000 revision over the prior two months, including April's 67,000 decline (revised from –28,000).
While the report landed in the general ballpark of Street expectations, it appears some in the market were bracing for worse results. U.S. stock futures moved higher after the release of the report, as did the dollar, while bond prices moved lower.
Continued Housing Weakness
Looking at the other components of the report, average hourly earnings rose 0.3%. Average weekly hours held at 33.7.
Manufacturing employment dropped 33,000, despite a gain of 6,000 in motor vehicles because of the end of the American Axle strike, and construction plunged 43,000, reflecting the continued weakness in housing. Service-producing industries lost 22,000 private jobs, while government employment rose 29,000. Temporary services jobs dropped 30,000, important since this is often a leading indicator for the overall job market. However, in June it also reflects a lack of summer jobs for students.
"Overall, a negative report but only slightly more negative than expected," said S&P Economics in a July 3 note. "It confirms we are in [a] recession."
The weekly initial jobless claims figures were released on the same day as the employment report (the jobs report was moved a day ahead of its customary Friday release because of the July 4 holiday). Initial claims for unemployment insurance benefits rose 16,000 in the week ending June 28, to 404,000. The market had expected a flat reading at 380,000. The four-week average of claims rose 11,250, to 379,250.
Unemployment claims over 400,000 per month are in a range consistent with recession, said S&P Economics. "This had been the last labor market indicator not in recession range."