Unemployment rate rises to 9.2 percent as U.S. adds only 18,000 jobs in June
By Neil Irwin,
Job growth came to a near-halt in June, according to surprisingly grim new data released Friday that raise doubts that the economy will bounce back from its spring lull soon.
Midway through a year that began with expectations that the ailing U.S. economy would finally take off, the nation is stuck in a muddle, growing too slowly to keep the jobless rate from rising, let alone to put some of the 14 million people looking for work back to earning paychecks. The odds that job creation will take off in the remainder of the year look slimmer with every new piece of data.
The 18,000 jobs U.S. employers added to their payrolls in June was less than a fifth of what economists had expected and far below the 125,000 or so needed to keep up with an ever-growing population. The unemployment rate rose to 9.2 percent from 9.1 percent.
“This does throw a lot of cold water on the idea that we’ll get a quick rebound,” said Michael Hanson, a senior economist at Bank of America Merrill Lynch.
The jobs survey was exceptionally bleak even in its details. Job growth in April and May was revised downward by a combined 44,000 positions. Temporary employers, often a leading indicator of future activity in the labor market, cut 12,000 jobs. And roughly 272,000 Americans dropped out of the labor force, perhaps out of frustration with their job prospects. The unemployment rate would have risen even higher had they continued their job hunts.
A broader measure of unemployment — including those who have given up looking for jobs out of frustration and those with part-time work who want a full-time job — rose to 16.2 percent from 15.8 percent.
Financial markets dropped in response to the weaker data, with the Standard & Poor’s 500-stock index down 0.7 percent Friday. Money flooded into U.S. Treasury bonds, viewed as a safe port in a storm, with the interest rate the federal government must pay to borrow money for a decade dropping to 3.02 percent from 3.14 percent.
It was, “all in all, an employment report with no redeeming features whatsoever,” Barclays Capital economist Peter Newland said in a research note. “Employment, unemployment, hours and wages all disappointed.”
On one hand, the weak reading on the job market should not come as a complete shock. For the first six months of 2011, the nation averaged 126,000 new jobs created per month, which is just about what one would expect with the 2 percent growth in economic activity over that period.
At the same time, there had been some recent signs that a spring slowdown in the economy was a mere soft patch. The report throws cold water on the idea, embraced by many economists, that the economy was held back by temporary factors in the first few months of 2011 — such as higher oil prices and the Japan earthquake — and was poised for a burst of growth as problems eased.
The weak numbers put pressure on policymakers in Washington to find solutions to the jobs problem — at a time when they are more polarized than ever about what those solutions would look like. The Obama administration used the occasion to plea for long-standing priorities, including extending a temporary reduction in payroll taxes, passing trade deals with South Korea and other nations, and investing in transportation and other infrastructure.
“I view this number as a call to action,” Austan Goolsbee, the president’s chief economist, said in an interview. “This number illustrates this thing that we knew, which is we’ve got to get the growth rate up. . . . There are all of those things we could do right now to support growth where there’s bipartisan agreement. They’re keyed up just sitting there. When you see jobs reports like this, that should make it clear that we need to stop bickering and get these things done.”
House Republican leaders seized on the unemployment news at a news conference Friday morning, slamming the White House for the weak results and noting that the administration had said when it rolled out its stimulus package in early 2009 that unemployment would not exceed 8 percent.
“The president always tells us he inherited a bad situation,” Rep. Jeb Hensarling (Tex.) , chairman of the House Republican Conference, said at the news conference. “I concede the point, but he has made it worse, and after two and a half years it is time for him to take responsibility and answer the question, ‘Where are the jobs?’ ”
The steepest losses in June, as they have been throughout 2011, were in government jobs. With state and local governments slashing workers by the tens of thousands to balance their budgets and the federal government posting heavy job cuts as well, overall government employment fell by 39,000 positions in June. That followed 48,000 jobs cut in May.
But unlike earlier in the year, when private-sector job creation was strong enough to make up for the decline in government jobs, businesses appear to be hiring less than they were.
For example, transportation and warehousing employment, a good proxy for broad economic activity, rose by 3,600 jobs in June, compared with 11,500 in May. Financial-sector employers cut 15,000 jobs after adding 14,000 in May.
In normal times, the Federal Reserve might respond to the weakening jobs picture with interest rate cuts. However, the Fed’s main interest rate target is already near zero and it has already taken a slew of unconventional steps to prop up growth. As a result, the Fed is unlikely to take further action unless there are signs that the economy is falling into recession or that deflation — a period of falling prices — is reemerging as a risk.
Washington Post staff writers Phillip Rucker, Sandhya Somashekhar, Felicia Sonmez and Amy Gardner contributed to this report.