June's Job Report: Bad, but Could Have Been Worse

Investors should view the 125,000 jobs lost in June the same way a baseball fan thinks of it when his team's pitcher gets out of a bases-loaded jam after allowing just one run to score: Bad, yes -- but it could have been worse.

Likewise, June's modest 83,000 gain in private sector payrolls was lower than economists had forecast, but given a batch of recent, subpar economic data, it's hard to complain about any gain.

Economists surveyed by Bloomberg had expected the U.S. to lose 130,000 total jobs in June, but to add 110,000 private sector jobs. Those unusual numbers reflect the 225,000 once-in-a-decade U.S. Census jobs that ended last month. Even so, June's decline was the first monthly drop in jobs this year.

The economy added a revised 433,000 jobs in May, though 411,000 of them were Census jobs. The economy added 313,000 and 208,000 jobs in April and March, respectively.

The unemployment rate fell in June to 9.5% from 9.7% -- its lowest level since July 2009 -- but that apparent good news is tempered somewhat because it mostly reflects fewer unemployed people actively looking for work: Those who give up the job search aren't officially counted as unemployed, even though they're not working. An alternate measure of unemployment, one that includes discouraged workers and part-timers who want full-time work, barely changed. It dipped to 16.5% in June from 16.6% in May.

Also, the average workweek decreased by 0.1 hour to 34.1 hours in June. Average hourly earnings decreased 2 cents to $22.53 per hour.

Temporary Optimism

There were a couple of bright spots in June's report. Businesses added 21,000 temporary workers, and have now added 379,000 temporary positions since a recent low in September 2009. The trend is encouraging because, historically, a rise in temp hiring has usually preceded a rise in permanent job additions by employers.

In addition, the manufacturing sector -- which has led previous U.S. economic recoveries -- added 9,000 jobs and has now added 136,000 jobs since December 2009.

Breaking down the June job numbers by sector, leisure and hospitality added 28,000 jobs; transportation and warehousing added 15,000 jobs; business management and technical consulting, 11,000 jobs; health care, 9,000; business support, 7,000; and mining, 6,000. On the downside, construction lost 22,000 jobs, and government -- including the departure of those 225,000 Census workers -- lost 208,000 jobs.

Long-Term Weakness in Job Creation

Despite the modest private-sector positives in June, and job gains in five of six months this year, the overall state of the U.S. labor market is still weak. The economy isn't creating the roughly 150,000 to 200,000 private sector jobs per month needed to reduce unemployment and help the recovery ascend to self-sustaining expansion status.

The retreat in the job creation trend carries the weight of problems that go beyond the 8 million Americans who lost their jobs during the 2007-2009 recession. Although that's certainly a massive job hole to fill, the difficulties in bringing the nation back to a strong employment footing are compounded because the recent recession followed George W. Bush's eight-year tenure, which featured the lowest job-creation performance of any president since World War II.

In sum, from the standpoint of job creation, June's overall job loss and low private sector job gain means the recovery has hit a rain delay. Now, it's up to policymakers, economists and business executives alike to clear the skies, so that both economic growth and job creation can get back on the field again.