467,000 jobs lost in June, pointing to US economy's bumpy recovery ahead
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(WASHINGTON) Employers cut a larger-than-expected 467,000 jobs in June, driving the US unemployment rate up to a 26-year high of 9.5 per cent, suggesting that the economy's road to recovery will be bumpy.
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| Longer queue: Jobless rate expected to hit 10% this year, rising further next year, before falling back |
The Labor Department report, released yesterday, showed that even as the recession flashes signs of easing, companies likely will want to keep a lid on costs and be wary of hiring until they feel certain the economy is on a solid ground.
Christina Romer, chairman of the White House Council of Economic Advisers, described the losses as 'worse than expected.'
'This is certainly a setback,' Ms Romer said. 'What we've been seeing over the last several months is moderating job losses, and that's what you get first before you see new jobs created.'
June's payroll reductions were deeper than the 363,000 that economists expected.
However, the rise in the unemployment rate from 9.4 per cent in May wasn't as sharp as the expected 9.6 per cent. Still, many economists predict the jobless rate will hit 10 per cent this year, and keep rising into next year, before falling back. All told, 14.7 million Americans were unemployed in June.
If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 16.5 per cent in June, the highest on records dating to 1994.
Since the recession began in December 2007, the economy has lost a net total of 6.5 million jobs.
As the downturn bites into sales and profits, companies have turned to layoffs and other cost-cutting measures to survive. Those include holding down workers' hours and freezing or cutting pay. The average work week in June fell to 33 hours, the lowest on records dating to 1964.
Layoffs in May turned out to be smaller, 322,000, versus the 345,000 first reported. But job cuts in April were deeper - 519,000 versus 504,000, according to government data.
Even with the higher pace of job cuts in June, the report indicates that the worst of the layoffs have passed. The deepest job cuts of the recession came in January, when 741,000 jobs vanished, the most in any month since 1949.
And there was some other encouraging job news yesterday. In a separate report, the department said the number of newly laid-off workers filing applications for unemployment benefits fell last week to 614,000, in line with economists' predictions. The number of people continuing to draw benefits unexpectedly dropped to 6.7 million.
Still, job losses last month were widespread. Professional and business services slashed 118,000 jobs, more than double the 48,000 cut in May. Manufacturers cut 136,000, down from 156,000.
Construction companies got rid of 79,000 jobs, up from 48,000 the previous month. Retailers eliminated 21,000, up from 17,600. Financial activities cut 27,000, following 30,000 in May.
The government cut 52,000 jobs, up from 10,000 the previous month. Leisure and hospitality cut 18,000 jobs, erasing a gain of the same size in May.
One of the few industries adding jobs: education and health services.
With the weakness in the job market, workers didn't see any wage gains in June. Average hourly earnings were flat at US$18.53.
The worst crises in the housing, credit and financial markets since the 1930s have plunged the country into the longest recession since World War II.
Many think the jobless rate could rise as high as 10.7 per cent by the second quarter of next year before it starts to make a slow descent. Some think the rate will top out at 11 per cent.
The post-World War II high was 10.8 per cent at the end of 1982, when the country had suffered through a severe recession.
An elevated unemployment rate could become a political liability for President Barack Obama when congressional elections are held next year. Mr Obama's Democratic Party holds a majority in both chambers of Congress. -- AP, Bloomberg
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