US economy sheds another 467,000 jobs

The US economy shed another 467,000 jobs last month, signalling aggressive government stimulus measures are failing to unshackle the labour force from the grips of the recession, official figures showed on Thursday.

The result was worse than economists predicted and pushed the unemployment rate from 9.4 per cent to 9.5 per cent, slightly better than expected but still a 26-year high. Thursday’s figure shows further erosion from the previous month’s decline of a revised 322,000 drop and knocked wind from the notion that the pace of job losses might be slowing.

“If you were banking on the US driving a vigorous recovery, think again,” said Alan Ruskin, a strategist at RBS Greenwich Capital. “The employment report can largely be taken at face value, and the face value story is a labour market that is not improving nearly as rapidly as the May data suggested.”

Wall Street was disappointed by the jobs report, with US stock futures steepening the early morning losses after the release. Less than an hour before the open futures for the benchmark S&P 500 index were 11.5 points down at 907.7. Those for the Dow Jones Industrial Average fell 107 points to 8,341 and those for the Nasdaq Composite index lost 8 points to 147.8.

A separate report on Thursday showed that the number of Americans claiming jobless benefits for the first time eased last week, falling by 16,000 to 614,000. Those continuing to claim unemployment benefits also fell, dropping by 53,000 to 6.7m and breaking a stretch of new record highs. Those figures were in line with expectations but that was overshadowed by the disappointing report on non-farm payrolls.

Since the recession began in December 2007, 6.5m jobs have been lost and the unemployment rate has climbed by 4.6 percentage points. Although the US has shed jobs in each of the last 18 months, the June losses still mark an improvement from the first three months of the year when an average of 691,000 jobs per month were lost.

The job losses reported by the labour department on Thursday were widespread across industries with manufacturing, business services and construction shedding 136,000, 118,000 and 79,000 jobs respectively. Government employment also declined last month, as temporary workers hired for the Census project were let go. Only education and health services added jobs in June.

The car industry has also been hit particularly hard, due to the bankruptcies of Chrysler and General Motors and the idling of many of their plants. Car dealerships cut 9,000 jobs last month. The automobile and parts sector shed 27,000 jobs and has lost nearly a third of its workers since the recession began.

“It’s a troubling pattern that not any one area has turned a corner,” said Brian Bethune, US economist at IHS Global Insight. “It’s a major battle we’re in to extract the economy out of this recession.”

Earnings also stagnated last month, remaining flat at an average hourly rate of $18.53. Companies have been freezing wages and cutting hours as a way to fight off more job cuts. The average work-week slipped to 33 hours, its lowest level since records began in 1964.

A mix of recent data during the last month has raised hopes that the US is due for a recovery from the worst recession in the last 50 years. However the timing or shape of that recovery remains muddled as people and companies deal with unprecedented uncertainty and fears over unemployment continue to crimp demand.

Manufacturing and housing have shown some signs of life amid a strong stock market rally in the first quarter, but consumer confidence continues to face headwinds and construction spending is sputtering.

Last week the Federal Reserve said in its latest Federal Open Market Committee meeting minutes that “the pace of economic contraction is slowing” but that household spending remains “constrained by ongoing job losses, lower housing wealth, and tight credit”. Economists expect the unemployment rate to rise above 10 per cent before falling back next year, however further accelaration could dim the recovery outlook.

“The consensus forecast for a second half recovery is overly optimistic,” said Steven Ricchiuto, chief US economist at Mizuho Securities. “Instead, the data is fully consistent with our forecast for a slower rate of decay in the economy.”

Additional reporting by Kiran Stacey

2 Jul 2009 2:47pm
By Alan Rappeport in New York

Source: The Financial Times

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