Job recovery hits a wall

chart_jobs_hiring_biggie_v4_all.top.gif By Chris Isidore, senior writer


NEW YORK (CNNMoney.com) -- The U.S. economy lost jobs in June, for the first time this year, as modest hiring by businesses only partly offset the end of Census jobs.

The Labor Department on Friday reported a net loss of 125,000 jobs in the month. That was due primarily to the loss of 225,000 Census jobs that had swelled payrolls in May.

Business hiring rebounded to 83,000, which was still a bit weaker than hoped. While it's up from the jobs private sector employers added in May, it was well below hiring levels in March and April.

"It's job growth, but it's a kind of growth that doesn't please anybody," said John Silvia, chief economist of Wells Fargo Securities. "We're not creating the jobs at a pace to help people who are looking for jobs. Jobs are going to remain hard to find."

Silvia and some other economists said the fact that businesses are still adding jobs should lessen fears that the economy is about to topple into another downturn, a so-called double-dip recession.

"Though disappointing, employment gains are substantially ahead of the 2002 recovery," said Kurt Karl, chief U.S. economist at Swiss Re.

But others suggested that the weak labor market raises the risk the economy could fall back into recession later this year.

"It is a Catch-22 situation," said Sung Won Sohn, economics professor at Cal State University-Channel Islands. "Businesses are reluctant to hire for fear of a double-dip recession. But without jobs, the economy can't grow."

Businesses have now added 593,000 jobs since the start of 2010, after cutting 8.5 million in 2008 and 2009 combined. President Obama pointed to the continued private sector job growth in his remarks Friday, but acknowledged more needs to be done.

"We are headed in the right direction," he said when announcing a government program to bring broadband Internet services to rural areas. "But ...we're not headed there fast enough for a lot of Americans. We're not headed there fast enough for me, either."

Republicans charged the report is proof the Obama administration's policy of trying to stimulate the economy and hiring through government spending has been a failure.

"Every Washington power grab is creating more uncertainty for investors and job creators, and leaving more families without a paycheck," said Sen. John Cornyn, R-Texas.

The construction sector lost another 22,000 jobs as the pace of building fell sharply with the end of a tax credit for homebuyers. And retailers, hit by softer consumer purchases, trimmed nearly 7,000 jobs.

But manufacturers added 9,000 jobs, and transportation companies and warehouses added nearly 15,000 jobs, showing some continued strength in the goods-producing sector. Leisure and hospitality was the leading sector with a gain of 37,000 jobs.

There also was a gain of 20,500 temporary workers by business, which could be a sign of future hiring, since employers often bring on temporary workers before they commit to permanent jobs.

There are still 339,000 Census workers on the job heading into July, many of whose jobs will be ending. That suggest that July could be another month with an overall loss in jobs.

State and local governments cut an additional 10,000 jobs in June. That, was countered by the gain of 27,000 non-Census jobs by the federal government.

Unemployment rate drops

The unemployment rate fell to 9.5% from 9.7% in May. Economists had forecast it would climb to 9.8%. But the improvement was due mostly to many discouraged job seekers not bothering to look for work and no longer being counted as part of the labor force.

Joseph LaVorgna, chief U.S. economist for Deutsche Bank, said that many of those people stopped looking for work because they lost extended unemployment benefits. To receive the benefits, they needed to be actively looking for work.

"The decline in the unemployment rate is not a reflection of strength, but rather a sign of discouragement among the ranks of the unemployed," he wrote in a note to clients Friday.

Congress has failed to pass an extension of benefits, which resulted in nearly half-million people losing their benefits by the middle of June when the unemployment numbers were compiled. Another 1.25 million have lost their benefits since mid-June, and nearly 800,000 more could lose benefits by the time July numbers are compiled.

The 14.6 million people still counted as unemployed have been out of work an average of 35 weeks, a record duration in the 62 years the government has tracked that figure. To top of page

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