The U.S. economy added 195,000 jobs in June, according to a Labor Department report released Friday morning. The nation's unemployment rate was at 7.6 percent. Follow our rapid-fire analysis of the report here.
Stock markets are about to open, but there were huge moves in reaction to the June jobs numbers was in bond and currency markets. They seem to be based on an interpretation of the strong payroll numbers as presaging tighter money from the Fed.
Here's the 10-year Treasury bond yield through the morning hours; it rose sharply, meaning higher interest rates for everyone from the U.S. government to homebuyers.
And here's how the dollar index, which charts the value of the dollar against six other major currencies, fared:
So, how does this rise in interest rates fit the longer-term trend? It continues a remarkable rise in rates since the start of May, as Fed officials began speaking more openly about winding down their bond purchase program. Here's the 10-year yield over the past year:
One bright spot in the report is in worker pay. Among private-sector employees, average weekly earnings rose to $828.35, from $824.90, or about 0.4 percent. Wages have remained depressed throughout the four-year economic expansion, but more months like June and American workers should finally start seeing some more money in their paychecks.
Bond markets don't like what they see in this jobs report. It's a case where good news for the economy could mean bad news for borrowers, as the data may lead the Federal Reserve to pull back on its easing programs.
The yield on 10-year Treasury bonds has risen a whopping 0.18 percentage points in early morning trading, with the bonds now yielding 2.68 percent. If sustained, those higher rates will soon translate into higher rates on home mortgages and corporate borrowing.
Markets seem to be interpreting the strong payrolls data as evidence that the Fed will indeed pull back its program of bond purchases, which as served as a support strut for those markets and helped keep long-term rates down.
Here is a breakdown of which sectors added jobs and which were the losers.
Leisure and hospitality: +75,000 jobs. This is a huge gainer, as it has been in recent months, suggesting that greater travel and tourism activity (and restaurant visits) are a significant driver of a strengthening labor market.
Professional and business services: +53,000. This sector was the big winner -- and it wasn't even driven by temporary services, which were responsible for only 9,500 of its added positions.
Retail trade: +37,100. Consumers are hitting the stores, it would seem, or at the least retailers are adding staff.
Construction: +13,000. It's not the gangbuster job growth we might want to see, but the housing rebound does seem to be putting construction workers back on the payrolls.
And the big losers:
Government: -7,000. Here we go again. This time, the federal government excluding the post office was a major culprit, responsible for 5,000 lost jobs, perhaps reflecting the sequestration policies taking hold.
Manufacturing: -6,000. It seems that the longer-term trend, of manufacturing jobs disappearing amid greater automation, even as manufacturing output rises, is reasserting itself.
One big question for markets is how the Federal Reserve will react to the jobs numbers. Do they, on balance, make it more or less likely that the central bank will begin tapering off its bond purchases later this year?
The Fed will likely see mixed signals out of the report. On one hand, the payrolls survey -- jobs as reported by employers -- is showing more improvement than it had a few months ago, giving a green light for the Fed to start tapering. On the other hand, the unemployment rate did not decline, and, indeed, a broader measure of joblessness rose.
On net, the report is likely good enough to be consistent with the Fed's plans to start pulling back on its purchases in the final months of 2013, but not good enough for the central bank to consider speeding up those plans.
Every month, the Labor Department updates its previous two months' reports with more complete and accurate data. That was a source of some of the better news in the June release. April and May job growth estimates were revised upward by a combined 70,000 jobs. For example, the May number was earlier estimated at 175,000 net jobs added; that is now 195,000 (the same as June, as it happens).
All that suggests we may be in a stronger underlying trend for job creation than thought even a few weeks ago.
Here's a dark cloud in what is generally a quite sunny report: A broader measure of unemployment spiked by half a percentage point.
U-6, as it is called, rose to 14.3 percent in June from 13.8 percent in May. That measure, in addition to capturing those actively looking for a job, also captures people who have a part-time job but want full-time work, and who want a job but have given up looking for one out of frustration. It is an unwelcome rise that suggests many Americans remain on the fringes of the workforce.
The unemployment rate may not have changed, but some of the details of the survey from which that number is derived pointed in a positive direction. In the Labor Department's monthly survey of households, 177,000 more people reported having a job. That was enough to push the ratio of the population that was employed up by a tenth of a percent, to 58.7 percent. That matches its highest level since late 2009.
The report is in! The nation added 195,000 jobs in June, the Labor Department said, considerably better than the 165,000 that analysts had expected. Also, job growth was stronger in April and June than earlier reported, to the tune of 40,000 more jobs added.
The unemployment rate was unchanged at 7.6 percent.
In 2009, Barack Obama came to change Washington. Today's speech showed how much Washington has changed him.
Obama's first presidential campaign, and his first inaugural address, were about moving America past our old arguments. His second presidential campaign, and his second inaugural address, were about winning those arguments. It's in the space between those two projects that the triumphs, disappointments and lessons of the first term live, and where the project of Obama's second term reveals itself.
Perhaps the most quoted passage in "The Audacity of Hope," the 2006 book that served as the ur-text for Obama's unexpected presidential campaign, was a section in which Obama dismissed the arguments of the Clinton years as "the psychodrama of the baby boom generation — a tale rooted in old grudges and revenge plots hatched on a handful of college campuses long ago — played out on the national stage.”
In "Goodbye to All That," his influential 2007 profile of Obama, Andrew Sullivan picked up on that theme. "If you are an American who yearns to finally get beyond the symbolic battles of the Boomer generation and face today’s actual problems, Obama may be your man," he wrote.
During his first inaugural address, delivered on a bitterly cold day in January 2009, Obama promised his presidency would make good on those hopes. "On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn-out dogmas that for far too long have strangled our politics," he said. "We remain a young nation, but in the words of Scripture, the time has come to set aside childish things."
Obama's first term was, by any measure, incredibly productive. He passed health-care reform and the Dodd-Frank financial regulations. He ended the war in Iraq and gave the order to kill Osama bin Laden. He bailed out the banks and passed well over a trillion dollars in stimulus. But he did not end the petty grievances and worn-out dogmas that strangle our politics. These debates were not, as it turned out, childish things that would look small in light of our current problems. They were fault lines running beneath our politics, and they grew larger and more dangerous throughout Obama's first term.
Obama's reelection campaign, and his second inaugural address, was founded on a very different premise: The old arguments were indeed strangling our politics, and the only way to move past them is to win them, and the only way to win them is to fight over them.
His speech today fit firmly in that project. He retold the story of American history in a way that emphasized the project of collective action and liberal governance. "Together, we determined that a modern economy requires railroads and highways to speed travel and commerce; schools and colleges to train our workers," he said. "Together, we discovered that a free market only thrives when there are rules to ensure competition and fair play. Together, we resolved that a great nation must care for the vulnerable, and protect its people from life’s worst hazards and misfortune."
And he painted a picture of America that is again discovering that it has severe problems that it can only solve through government action. If there was a core to the speech, it was these two sentences: "The commitments we make to each other – through Medicare, and Medicaid, and Social Security – these things do not sap our initiative; they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great."
Inaugural speeches are not typically the venue where presidents lay out detailed policy agendas. That comes a few weeks later, at the State of the Union. But Obama did offer hints today.
"We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations. " he promised.
"We believe that America’s prosperity must rest upon the broad shoulders of a rising middle class," he said, referencing his administration's ongoing belief that the government must do more to combat inequality.
"We are true to our creed when a little girl born into the bleakest poverty knows that she has the same chance to succeed as anybody else," he said, in a line that added weight to rumors that the Obama administration is considering a push on early childhood education.
He agreed that "we must make the hard choices to reduce the cost of health care and the size of our deficit," but cautioned that, in doing so, his administration will "reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future."
He was explicit in his mentions of "our gay brothers and sisters" and emphatic that "our journey is not complete until our wives, our mothers, and daughters can earn a living equal to their efforts."
This was not a speech that assumed that the disagreements that split our politics are based on the psychodramas of the past nor that they will fall easily before the onslaught of the future. But it was a speech, more so than most Obama has offered, that signaled his intention to join the battle of ideas, to use his bully pulpit to make an aggressive and uncompromising case for why his side is right, and to not rest until the American people agree that the other side is wrong.
In his first term, Obama changed policy. In his second, he wants to change minds.
A week after he won the 2008 presidential election, Barack Obama addressed a gathering of governors and other officials in Los Angeles, assuring them that global warming would be a top priority for his first term. "Now is the time to confront this challenge once and for all," he said. "Delay is not an option."
His goal at the time? An ambitious plan to cut America's heat-trapping greenhouse-gas emissions by 80 percent by 2050 and invest $150 billion in new clean-energy and efficiency technologies over the next 10 years. It was a pledge to completely upend the existing U.S. energy economy.
But Obama got only part of the way there, to the chagrin of many of his green supporters. True, U.S. carbon dioxide emissions have fallen 7.7 percent since 2006 — but much of that has been due to the recession and a glut of cheap new natural gas that has displaced dirtier coal, a dip that could just prove temporary.
It's also true that the Obama administration made some fairly large moves on energy and climate in the first term. The stimulus contained $90 billion for various green technologies. Fuel-economy standards were ratcheted up to 54.5 miles per gallon by 2025. The EPA began regulating carbon dioxide under the Clean Air Act. But all that was overshadowed by the fact that the Senate declined to pass what was by far the biggest part of Obama's climate agenda — a nationwide cap on carbon emissions. Hence the disappointment.
So what happens in the upcoming term? In his second inaugural address Monday, Obama took time to stress that global warming would once again be one of his major priorities:
We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations.
Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms.
The path towards sustainable energy sources will be long and sometimes difficult. But America cannot resist this transition; we must lead it. We cannot cede to other nations the technology that will power new jobs and new industries – we must claim its promise.
That is how we will maintain our economic vitality and our national treasure – our forests and waterways; our croplands and snowcapped peaks.
But what might this actually mean in practice? Obama isn't going to persuade Republicans in Congress to pass a cap-and-trade bill in the next two years. Instead, the White House will likely have to consider some more modest options. Here are a few possibilities:
1) Use the EPA to reduce carbon emissions from power plants. Thanks to a 2007 Supreme Court decision, the EPA has the authority under the Clean Air Act to regulate carbon dioxide. So far, the agency has used that power to write carbon standards for future power plants that have yet to be built. Green groups are now urging the EPA to turn its attention to existing power plants, which emit 40 percent of the nation's carbon pollution.
One group, the Natural Resources Defense Council, has released a detailed plan for how this might work. The EPA would set different overall emissions goals for each state, and power companies would figure out how to meet them through a combination of efficiency, less coal use or renewable power. All told, NRDC estimates that the United States could cut its carbon emissions an additional 10 percent by 2020 this way.
The problems here? Many utilities are likely to oppose these regulations, which NRDC expects to cost some $4 billion per year. What's more, using the Clean Air Act to regulate carbon dioxide could prove legally dicey, especially if the EPA pursues sharp cuts. (See this old post for a look at how the courts might block carbon regulations.)
2) Use the EPA to crack down on methane leaks from natural-gas infrastructure. Thanks to fracking and other new drilling techniques, the United States is now awash in cheap natural gas. That's mildly helpful on the climate front if natural gas displaces coal, since it means less carbon-dioxide in the atmosphere. But there's a catch: The process of drilling for and transporting natural gas can often produce methane leaks. And methane is a potent greenhouse gas in its own right.
In a recent open letter (pdf) to the White House, the Clean Air Task Force urged the EPA to tighten restrictions on methane emissions in the coming years. The agency has proposed new rules on toxic air pollution from natural-gas fracking — rules that could help curb methane leaks as well. But that still leaves oil wells, leaky gas pipelines, and other bits of natural-gas infrastructure untouched. Hence the call for new regulations.
This won't be easy. The oil and gas industries aren't exactly enthusiastic about the EPA wading in to oversee the fracking boom, which has been one of the few bright spots in the U.S. economy these past four years. But green groups point out that leaking methane can often be captured and resold at a profit, which means that industry and environmentalists might be able to find common ground here.
3) Order government agencies to take the long view on climate change. Most of the steps listed above would help the United States meet Obama's short-term goal of cutting carbon emissions 17 percent by 2020. But the open letter from the Clean Air Task Force warns that cutting emissions 80 percent by 2050 will require more than just chipping away at coal plants and methane leaks. Clean-energy tech will have to get a lot better, too.
"Ultimately," the letter notes, "we will need to capture the carbon from gas-fired power plants as well. Renewable energy faces challenges of scale, cost and intermittency; carbon capture and storage faces cost challenges at full scale; and current forms of nuclear power are challenged by safety, waste management, weapons proliferation and cost risks."
Even if Congress isn't offering up further funds for clean tech, the letter notes, agencies such as the Department of Energy can at least start thinking seriously about what it will take to get an 80 percent cut by mid-century. A long-term plan is a first step.
4) Ultimately, though, big moves will require Congress. Obama has signaled at many points that he would be open to more sweeping action to tackle global warming. He has proposed a clean energy standard that would require utilities to get a greater portion of their electricity from renewables. Joseph Aldy, a former White House adviser, has hinted that Obama would be open to a carbon tax if Republicans were willing to negotiate.
But Obama would have to get those proposals through Congress first. And, after that, he’d have to revive international climate talks with countries such as China and India, which have been flagging of late. Which means we’re still a long, long way from a world “that isn't threatened by the destructive power of a warming planet.” By itself, Obama’s reelection certainly won’t change that. There’s a whole lot more he—and the rest of the world—would have to do.