If you look deeper, Friday's report gets worse as more Americans exited the workforce last month
June was a terrible month for the labor market. Just 18,000 jobs were added to the economy. That's fewer than what's needed to accommodate monthly population growth, so the unemployment rate ticked up to 9.2%, from 9.1% in May. As bad as they sound, these headline numbers actually make the month's performance look better than it was: they mask the fact that more than a quarter million Americans left the workforce in June. There's no good here.
The Headline Numbers
Let's start by looking at the historical charts form the Bureau of Labor Statistics. Here's the unemployment rate:
This isn't a pretty picture. In March the rate dropped all the way down to 8.8%, but has since consistently risen. June's 9.2% is the highest this year. It's also the first month in 2011 that the number of unemployed Americans has ticked back up above 14 million.
Looking at the number of jobs created isn't any more comforting:
Again, May and June just look awful. The months added only 25,000 and 18,000 jobs, respectively. Remember, for the unemployment rate just to remain level, the economy needs to add between 125,000 and 175,000 jobs per month. We're not even close to that baseline, which is why the labor market picture is actually worsening.
Once again, the government created a headwind for hiring, as the private sector actually added more jobs in June than the total shown above. But even private hiring was relatively anemic with 57,000 jobs added. That's the fewest net jobs the private sector has added since May 2010. Here's the chart:
Few sectors had much to celebrate either:
Other than leisure and hospitality, no sector had a particularly good month. You can see that government layoffs continue to make matters worse. In June, government firings were led by the U.S. Postal Service, which shed about 10,000 workers, and local government, which laid off about 13,000 teachers.
The Broader Picture
As bad as all of this looks, it doesn't capture some of June's deeper problems. During the month, employment shrank by 445,000. Unemployment only rose by 173,000, because 272,000 Americans left the workforce. But you can't try to blame this on Americans who just wanted to retire or stop working for personal reasons. The report also indicates that 310,000 more workers who were not technically considered unemployed still wanted a job, but did not have one.
Here's how the broader unemployment picture looks if you include those workers:
The number of workers in June who were labeled as technically unemployed or were not in the workforce but wanted a job rose by 483,000 to 20.6 million. That's a pretty staggering increase. The broader unemployment rate calculated using this broader measure was 12.9% in June.
You can also see this increase in the jobless but not technically unemployed population through the change in the number of discouraged or otherwise marginally attached workers (though note, that this is the only data in this post that is not seasonally adjusted):
The sum of these two groups also rose by 474,000 in June. This helped to push up the broadest measure of underemployment, "U-6," which measures the number unemployed, discouraged, marginally attached, or working part time for economic reasons. It increased to 16.2% in June, from 15.8% in May.
You can also see that most segments of unemployment duration also rose in June:
The "less than 5" segment had the biggest jump, up 412,000. This indicates that many newly unemployed Americans hit the job market last month.
June's report contains another startling statistic. Average weekly earnings of all employees plummeted by $2.64 during the month. This was the biggest decline since January 2008 and the third biggest since 2006. And these wages are not adjusted for inflation, so Americans' purchasing power declined by even more, as prices have been rising. Prior to June, wages had grown for 6 months straight.
There's really no way to spin June's unemployment report: it's just ugly. We saw anemic hiring, more layoffs, and additional workers who want a job exiting the labor market. We also saw wages decline.
None of this is good, even if temporary. As unemployment remains high and wage growth stagnant, a recovery in spending will be elusive. And if Americans aren't spending more, then hiring will remain weak, as employers are looking for more demand before bringing on additional workers. This is a vicious cycle that the U.S. economy cannot seem to break out of.
Image Credit: REUTERS/Tim Shaffer