US adds 80,000 jobs in June, as growth remains sluggish

The economy has started the summer at a walking pace – a slow walking pace.

This lethargy was reflected Friday in the June jobs numbers issued by the Department of Labor, which reported that the economy created only 80,000 new positions. The unemployment rate remained unchanged at 8.2 percent.

The June numbers were the third consecutive month of disappointing job data. Over the past three months, the US economy has created fewer than 100,000 jobs per month. Within the June data, there was one bright spot: Payrolls and hours worked rose at a decent clip, indicating that businesses, while they might not be hiring, were giving their workers overtime to fill orders.

The slow job growth has important ramifications. First, it puts additional pressure on the Federal Reserve, which recently began a new effort to reduce long-term interest rates. Secondly, the lack of job growth makes it easier for presumptive Republican nominee Mitt Romney to question President Obama’s handling of the economy. And third, the low number of new jobs puts the economy closer to the brink of another recession.

“For the last three months we’ve averaged about 75,000 jobs a month,” says economist Joel Naroff of Naroff Economic Advisors in Holland, Pa. “That is approaching stall speed.”

It’s not surprising that job growth in June was so anemic given world events, says Mr. Naroff.

First, there was uncertainty over what would happen in Europe. Concern mounted that some big European banks might fail. Spain and Italy had to pay a rate higher than 7 percent to borrow money, a situation that economists said could not continue for very long. Some doomsayers thought a recession in Europe could spread to the US, which may have discouraged businesses from hiring.

“Europe was a big hurdle,” says Naroff. The Europeans have now “kicked the can down the road, pretty far down the road” with a political agreement to try to unify their budget processes, he adds.

Second, many businesses might have wanted to see how the US Supreme Court would rule on the Obama health-care law. Factory owners complained that until that issue was decided, they did not know how much it would cost them to hire new workers.

Third, the summer started off with a series of heat waves that seemed to sap consumers’ willingness to spend. Although the price of gasoline was falling, consumers may have been thinking about their electric bills as they ran their air conditioners to beat the heat.

“No one wants to go out when it’s hot – it’s a possibility,” says Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla. “But the malls are air-conditioned."

1 | 2

Next