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Unemployment rate falls, but momentum weak in job market

By Neil Irwin
Friday, July 2, 2010; 10:28 AM

The nation's unemployment rate fell in June, though hiring by the private sector remained soft, according to a government report Friday. The figures suggest the economic recovery is moving forward this summer, but with weak momentum in the job market.

The jobless rate was 9.5 percent last month, down from 9.7 percent in May, a surprising decrease that came as hundreds of thousands of workers dropped out of the labor force. Private employers added 83,000 jobs in June, more than double the rate in May but still below the six-figure job creation numbers that would suggest a strong recovery in employment.

Overall, employers shed 125,000 jobs in June; however, that figure was distorted by the Census Bureau cutting 225,000 temporary jobs. The total of 100,000 jobs added, excluding the census, is lower than the 130,000 or so jobs needed every month just to keep up with growth in the labor force, which could put upward pressure on the jobless rate in the months ahead.

Friday's jobs report was eagerly anticipated by economists and Wall Street analysts, who are searching for signs of whether a recent spate of weak economic data -- including last month's jobs report -- means that the economic recovery is sputtering out. The answer from the June report: The expansion that began last year has indeed lost momentum, but the numbers are not so bad as to suggest the nation is heading into a double-dip recession.

The private-sector job growth number, for example, is a deceleration from strong job creation levels in March and April, but it is better than any month out of the past 31, other than those two.

"Make no mistake -- we are headed in the right direction," President Obama said. "But . . . we're not headed there fast enough for a lot of Americans. We're not headed there fast enough for me, either."

Obama, who spoke to reporters from Andrews Air Force Base before flying to West Virginia to participate in a memorial service for Sen. Robert C. Byrd, vowed to do "everything in my power" to push the nation's economic recovery forward. As part of that effort, he announced nearly $800 million in stimulus grants to several dozen projects that will expand broadband Internet access in communities across the country.

"The recession dug us a hole of about 8 million jobs deep," Obama said. "And we continue to fight headwinds from volatile global markets. So we still have a great deal of work to do to repair the economy and get the American people back to work."

Many of the details of the Labor Department report suggest a job market that is muddling through, rather than beginning a strong expansion. May job growth was revised downward, for example. The average workweek shrunk to 34.1 hours, from 34.2, and average hourly earnings at private employers fell by 2 cents to $22.53.

"No double-dip, but no rapid recovery either," said John Silvia, chief economist at Wells Fargo, in an e-mail.

Even the decline in the overall unemployment rate, at first glance the best news in the report, is less positive than it appears. The number of people who described themselves as employed actually fell by 301,000. But many more people -- 652,000 -- counted themselves as no longer being in the labor force at all, possibly out of frustration, pushing the unemployment rate down.

Job creation was strongest in the professional and business services sector, which added 46,000 positions, though nearly half of those were in temporary services field. Other sectors to add large number of jobs were leisure and hospitality, which added 37,000, and education and health care, which added 22,000.

Sectors that slashed jobs included construction, which cut 22,000 positions; financial activities, which shed 15,000 jobs; and state and local government, which cut 8,000 positions.

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