Nearly a year after the U.S. economy began to heal, it is struggling to generate jobs at anything near a healthy pace.
Instead, hiring is anemic, the latest sign of the frailty in the economic recovery.
Private employers added 83,000 jobs in June, the U.S. government reported Friday, a disappointing figure for anyone hoping the labour market would move into higher gear.
At the same time, a temporary surge in government hiring petered out with the end of the once-a-decade census, removing 225,000 people from the country’s payrolls. The loss of the census jobs mean that over all, payrolls decreased by 125,000 last month, the first such decline this year.
Friday’s report points to a pace of job creation that is far from the speed required to spur spending and slice unemployment. Simply to absorb new entrants to the work force, the U.S. economy needs to create about 100,000 jobs a month.
“We’ve obviously stopped the bleeding,” says Joshua Shapiro, chief U.S. economist at MFR Inc. in New York. But when it comes to creating jobs, “there’s very little upside momentum.”
The unemployment rate, measured in a different survey, edged down to 9.5 per cent. The reduction came not because of strong hiring, but because the labour force contracted, a sign that people are discouraged and no longer looking for work.
Much of the problem for the U.S. labour market relates to the depth of the damage wrought by the downturn. The country has lost about 8 million jobs since late 2007, which produced the sharpest rise in the unemployment rate of any recession of the last 50 years. Employers will have to add jobs month after month, in large numbers, for the country to return to anything remotely resembling the labour situation that prevailed three years ago.
Earlier this year, it appeared that job creation was revving up to a level that, with time, could make a good dent in the unemployment rate. Now economists believe that joblessness will remain at or near these levels through the end of this year and in a worse-case scenario, even longer.
The job market is emerging as a key political issue ahead of November’s mid-term elections. “Make no mistake – we are headed in the right direction,” President Barack Obama said Friday. “We’re not headed there fast enough for a lot of Americans. We’re not headed there fast enough for me, either.”
Without increased hiring, which puts money in the pockets of consumers, the recovery will not be a robust one. “It’s a Catch-22 situation,” said Sung Won Sohn, an economics professor at California State University. “Businesses are reluctant to hire for fear of a double-dip recession,” but if they don’t, then consumers won’t have more income to spend, which depresses economic growth.
For those seeking work, it is still a grim picture, with roughly five people looking for each available position. Once out of a job, people are staying unemployed for longer periods of time, which in turn makes them less likely to be hired. The average length of unemployment rose to 35.2 weeks, a record.
Cathy McClure, 52, is one of the lucky ones. After being out of work for two years, she landed a job last month at a company that rents and sells construction equipment near her home in Rockford, Ill. The opening was advertised in a local paper and about 100 people replied, Ms. McClure says.
Despite the new job, she says she’ll be sticking to the frugal habits and curtailed spending of the last two years. Her car has 160,000 miles (250,000 km) under its tires but she doesn’t want to be saddled with the fresh monthly payments necessary to buy a new one. “I’m hoping I can get by for a year or two,” she says, while she waits for the direction of the economy to become clearer.
Friday’s report provided further signs that consumers have little ammunition with which to increase spending. Average hourly earnings edged lower in June, pushing the annual grown rate down to 1.7 per cent, the lowest such figure in six years. “Wages are more or less stagnating,” said Paul Dales, U.S. economist at Capital Economics.
The absence of upward pressure on wages gives ammunition to those who believe the U.S. faces the threat of deflation, which can produce a vicious cycle of falling prices and contracting economic activity.
