If you needed any convincing that The Great Recession was still receding you got it Thursday morning. The employment report was significantly worse than expectations. June was the 18th consecutive month of net declines of nonfarm payroll employment. It was the 10th consecutive month to record a decline of over 300 thousand jobs.
After employment losses moderated in May, and after weekly initial unemployment claims seemed to stabilize, hopes were raised in recent weeks that the labor market was seeing some “green shoots”. This now appears to have been a premature judgement, at least in reference to the job market.
In every industry except health care the job losses were higher in June than in May; a total of 467 thousand compared to an average expectation of about 350 thousand. The unemployment rate continued its rise and is now at 9.5%.
Hours worked dropped to 33 from 33.1, the lowest level since data have been kept. Clearly some employers are reducing the hours worked instead of making further layoffs. Dave Rosenberg, the former Merrill Lynch economist who is now with Gluskin Sheff, a Toronto-based money management firm, calculates that to match June production while using the same hours worked as in May would have meant job losses of about 800,000!
Further, the diffusion index fell from 31 to 28.6, meaning that only 28.6% of the employers covered by the survey did any hiring.
The average duration of unemployment jumped to 24.5 weeks from 22.5. Both the size of the increase and the level set new records.
The Bureau of Labor Statistics also reports the number of people who are neither currently working nor looking for work , but say they want a job, and people who are employed part-time because that’s all they can get (officially called the U-6 unemployment report). This group now totals a whopping 16.5% of the workforce, having edged up from 16% reached in February.
To expect any significant improvement in consumer spending with this kind of headwind is wishful thinking.