U.S. Loses 62,000 Jobs, Jobless Rate Holds at 5.5%
.S. employers cut jobs in June for a sixth consecutive month as soaring fuel prices and a slowing economy forced companies to reduce costs.
Payrolls fell by 62,000, close to economists' median forecast, after a 62,000 drop in May that was greater than initially reported, the Labor Department said today in Washington. The jobless rate remained at 5.5 percent after jumping in May by the most in two decades.
Job losses, along with record gasoline prices and tumbling home values, make it more likely consumer spending will falter once the lift from federal tax rebates fades. A weakening labor market may also prompt Federal Reserve policy makers to put off their first interest-rate increase since 2006.
``The job market remains weak and will probably stay weak for a while,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. ``The Fed is still on inflation watch, but the price pressures from commodities have not moved into the wage-setting process,'' helping to limit price pressures, he said.
Stock futures rallied and Treasuries fell after the report. Futures contracts on the Standard & Poor's 500 Stock Index advanced 0.8 percent to 1,273 at 9:05 a.m. in New York and 10- year note yields rose to 4.00 percent from 3.95 percent.
Total Losses
The June figures brought total job losses for the first half of 2008 to 438,000. In 2007, the economy generated 91,000 jobs a month on average. Revisions subtracted 52,000 from payroll figures previously reported for April and May.
``It's really a weak labor market,'' Kathleen Stephansen, chief global economist at Credit Suisse Holdings USA Inc. in New York, said in an interview with Bloomberg Radio. ``When you look at the details it seems as though there is no redeeming factor here. You have weakness in most industries.''
Economists had projected payrolls would drop by 60,000 after a previously reported 49,000 decline the prior month, according to the median of in a Bloomberg News survey.
Trends in jobs, sales, production and incomes, in addition to changes in gross domestic product, are the criteria used by the National Bureau of Economic Research to determine when contractions begin and end. The Cambridge, Massachusetts, group is the arbiter of U.S. recessions.
Fed's Outlook
``Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters,'' Fed policy makers said last week, when they kept their benchmark rate at 2 percent. Central bankers had also signaled that inflation was an increased risk.
Another report from the Labor Department today showed initial claims for jobless benefits rose by 16,000 to 404,000 last week. The total, higher than economists forecast, brought the four-week average to the highest since October 2005, just after Hurricane Katrina. The total number of people collecting benefits dropped to 3.116 million from 3.135 million.
Oil prices that topped $145 a barrel today are hammering manufacturers and service companies alike. Factory payrolls dropped by 33,000 workers after declining by 22,000 in May. Economists had forecast a drop of 30,000.
Auto manufacturing and parts industries gained 5,600 jobs, reflecting the end of a walkout at an auto parts manufacturer, the report said. About 20 General Motors Corp. plants that were shut or partially idled returned to work after a 12-week strike at American Axle & Manufacturing Inc. was resolved in late May.
Construction, Finance
The worst housing slump in a quarter century and the resulting collapse in subprime lending were reflected in today's report. Payrolls at builders declined by 43,000 after dropping 37,000 the prior month, bringing the total loss of construction jobs since September 2006 to 528,000. Financial firms trimmed payrolls by 10,000, after a 3,000 decline the prior month.
Service industries, which include banks, insurance companies, restaurants and retailers, added 7,000 workers after a decline of 8,000 in May. Retail payrolls decreased by 7,500 after a 22,600 decline.
Bank of America Corp., the second-largest U.S. bank, will cut about 7,500 jobs after buying Countrywide Financial Corp. amid mounting subprime-mortgage losses, Charlotte, North Carolina-based Bank of America said June 28.
Other service companies, a source of relative strength in recent months, are also cutting staff. Starbucks Corp., the world's largest chain of coffee shops, will close 600 U.S. locations and eliminate as many as 12,000 jobs, the most in its history, the Seattle-based company said this week.
Government payrolls increased by 29,000 for a second month in a row.
Hours Worked
The average work week remained at 33.7 hours. Average weekly hours worked by production staff slipped to 40.8 from 40.9, while overtime was unchanged at 3.9 hours. That brought the average weekly earnings up $2.02 to $606.94 last month.
Workers' average hourly wages rose to $18.01, up 6 cents or 0.3 percent. Hourly earnings were 3.4 percent higher than in June 2007, the smallest 12-month increase since January 2006. Both increases were in line with forecasts.
Declines in employment signal consumer spending, which picked up in May as the government sent out tax rebates, may weaken as the stimulus checks are spent.
``The rapid up-tick in fuel prices pretty much absorbs the stimulus we're seeing in the economy,'' Fritz Henderson, GM's chief operating officer, said in an interview in Wilmington, Delaware, on June 3.
