We knew it was going to get worse before it got better.
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But it doesn’t make it any easier swallow.
Joblessness in the U.S. still is rising, and there doesn’t seem to be a darned thing we can do about.
U.S. employers cut 467,000 jobs in June. The payroll decline was substantially more than forecast, and it follows a 322,000 drop in May. The national jobless rate has now risen to 9.5 percent, the highest since August 1983.
Today’s report also showed the average work week fell to 33 hours, the lowest level since records began in 1964, from 33.1 hours in May. Average weekly hours worked by production workers rose to 39.5 hours from 39.4 hours, while overtime held at 2.8 hours. That brought the average weekly earnings down to $611.49 from $613.34.
Service industries, which include banks, insurance companies, restaurants and retailers, subtracted 244,000 workers after falling 107,000. Retail payrolls decreased by 21,000 after a 17,600 drop. Financial firms reduced payrolls by 27,000, after a 30,000 drop the prior month.
What Stimulus Package?
With these disheartening numbers, there is little evidence that President Obama’s massive economic stimulus package is having an effect on shoring up the job market. Opponents of the President’s plan are pressing the administration to abandon further spending in favor of added tax incentives, which, they argue, will find their way into the economy faster. For his part, the President is urging patience.
In sharp contrast to the negative unemployment data, U.S. consumer confidence hit its highest level since February 2008. According to the monthly survey conducted by the University of Michigan, the confidence of American consumers brightened in June to 70.8 from 68.7 in May. In the face of the darkening employment picture, the prospects for a continued rise in consumer buying looks dim.
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Analysts agree that more consumer spending is required for a sustained recovery. A bump in these numbers generally is considered a sign that recovery may be on the horizon.
Despite the rise in the raw confidence numbers, fear of job security has tempered spending, especially for big ticket items like automobiles or major appliances.
Separately, household savings by Americans rose to its highest level in nearly 15 years. This upswing in the savings rate is evidence that Americans are feeling better about the security of the banking system, which, in turn, has aided the banks in regaining some of their lost liquidity.
Under normal economic conditions, a resurgence in savings should lead to a quicker revitalization of the housing market. Yet, the lingering pall of increasing joblessness appears to be slowing any semblance of an immediate and sustainable revival in this sector.
Jobs Affect So Many Sections
Even though the S&P 500, in conjunction with other major stock indices, has posted substantial gains since hitting historic lows in March, share prices continued to slide for the third straight week on concern that the worse-than-projected employment numbers will prolong the recession.
While it is no surprise that Treasuries have continued to climb with oil prices retreating, most market watchers were taken aback by the persistent drop in precious metal values. As a rule, gold tracks with Treasuries and generally reacts inversely with stock prices.
As the stock market has pulled back over the course of the last three weeks, there has been mounting expectation that gold would test the limits of the record highs from last year when it rose above $1,030 an ounce. Overall, gold purchases remain brisk, but the price has yet to keep pace with the demand.
Although employers have not yet started rehiring, there is some evidence that the freeze in the manufacturing sector of the economy is beginning to thaw.
Yesterday, the Institute of Supply Management (ISM), which measures the purchasing appetite of U.S. businesses, said its index of activity leaped from 34.9 in May to 39.9 in June. Economists had been expecting a reading of 39. However, any reading below 50 still indicates a continued contraction in the economy.
Policymakers and analysts were also marginally buoyed by the latest Standard & Poor’s/Case-Shiller housing index statistics released yesterday. The numbers show the market falling less dramatically than it had been earlier in the year. The 10 and 20 city indices were both down 18 percent in April, versus the same month in 2008. But that residual decline was less severe than it had been in January, February and March.
When taken as a whole, these numbers are still little consolation those Americans who have lost their jobs.
Based on today’s figures, job losses are projected to swell to as high as 10.5 percent nationally by mid-2010. This means that on top of the 15 million Americans already out of work, another 1.5 million soon may be added to the unemployment rolls.
With Independence Day celebrations gearing up across the country, it’s a good time to commemorate the gifts of freedom. But it’s tough to join the revelry if you can’t afford the price of sparklers.
John Cohn is a senior partner in the Globe West Financial Group, based in West Los Angeles. He may be contacted at www.globewestfinancial.com
