From the WSJ:
(…) The headline figure showed a loss of 125,000 jobs last month, though it largely reflected the layoffs of temporary census workers. More telling, U.S. private-sector employers added only 83,000 jobs. (…)
What the report suggests is that the weakness seen in May’s report wasn’t an aberration, but an indication of slowing growth. And May’s private-sector hiring figure was actually revised lower by 8,000 to a gain of just 33,000 jobs. Meanwhile, the detail of the June report, such as the average workweek and hourly earnings, took a step back. That broke a recent string of gains. Any sustained weakness in such gauges is a clear warning for consumer spending.
Yet investors may want to consider the bigger picture before assuming a double-dip. Private-sector hiring in the second quarter averaged 119,000, compared with about 78,700 in the first quarter and negative 270,000 during the final three months of 2009.
The jobs report is still not clear enough to make up investors’ ever-changing minds on whether the recovery has stalled. That sets up markets for a volatile summer.
David Rosenberg:
Nearly 46% of the ranks of the unemployed are populated with people who have been out of work and looking fruitlessly for at least six months — again, this is without precedent.(…)
We see that not only in the headline but also in the diffusion index for private sector hiring, which fell from 54.8% in May to 52.2% in June. This tells us that almost half of the companies in the survey are no longer adding to their payroll. It should also not be lost on anyone that the companion Household survey, which has more sensitivity to what is happening at the small-business level compared to the nonfarm payroll survey, showed a 301,000 job plunge in June and that followed a 35,000 falloff the month before — the steepest contraction for the year and the first back-to-back declines since last fall.
The amount of slack in the U.S. labour market is palpable, and the seeds of deflation are being sown. (…)
Unless the laws of supply and demand have been repealed in the labour market, it would stand to reason that wages would come under downward pressure, and this was one of the most, if not the most important, takeaway in today’s report because average hourly earnings dropped 0.1% in June — THIS IS A 1-IN-50 EVENT! — and this dragged the year-over-year trend down to 1.7% from 1.9% in May, and 2% at the turn of the year. (…)
The workweek fell 0.3% as well so what that in turn means is that average weekly earnings — the proxy for wage-based personal income coming out the payroll report — contracted 0.4% last month.
What was particularly disconcerting in the payroll data was the sharp slowing in factory payrolls — from 38,000 in April, to 32,000 in May, to 9,000 in June in what was the low water-mark for the year. Not only that, but in line with the soft ISM reading, the diffusion index for hiring in the manufacturing sector sank to 52.4% from 62.2% in May, the most pronounced decline since June 2008 when the recession was in full swing.
We say this is disconcerting because it was the manufacturing sector that carried the ball for this nascent recovery and it increasingly looks as though the inventory cycle is in the process of being truncated. Who is left to pick up the baton? Nobody we can think of. Retailers are certainly not looking at a bullish consumer outlook or they wouldn’t have cut their workforce by 7,000 in June after an 11,000 slice in May. If banks were looking at stronger loan demand, they too likely would not have slashed 15,000 from their payrolls after cutting 12,000 in May. Construction firms shed 22,000 after a 30,000 slice in May — no surprise here. This begs the question that without hiring out of the banks, the retailers, the builders and now the manufacturers, it stands to reason that we are in for a prolonged period of labour market malaise. Let’s not confuse pessimism for realism.
The outlook is not constructive as the components of the payroll report that tend to “lead” all faltered. Revisions tend to build on themselves and once again, they were on the downside. The workweek fell 0.3% and by 1.2% in manufacturing. Temp agency hiring slowed in June, to 21,000 from +31,000 in May and was the smallest tally since last September. And, we finished the month of June with initial jobless claims at 472,000, which history would suggest is consistent with net job losses. There is no more important metric to watch over the course of the next month.
Related posts:
- JOB REPORTS POINT TO WEAK US JOB GROWTH IN AUGUST
- JOB CREATION RESUMES IN US
- WEAK MAY EMPLOYMENT REPORT
- EMPLOYMENT INDICATORS STILL WEAK
- FROM DOUBLE DIP TO MUDDLING THROUGH
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