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Hiring slowed to a near-standstill in June

Hiring slowed to a near-standstill last month. Employers added the fewest jobs in nine months and the unemployment rate rose to 9.2 percent.
Image: Renita Manny Williamson
Renita Manny Williamson, a former Army reservist, listens as Mississippi Department of Employment Security representative Tuskie Sanders, right, suggests ways to improve a job application letter at a state employment center in Jackson, Miss. The U.S. jobless rate rose to 9.2 percent in June as employers added only 18,000 jobs.Rogelio V. Solis / AP
/ Source: news services

Hiring slowed to a near-standstill last month, the government said Friday, as employers added the fewest jobs in nine months.

The Labor Department said the U.S. economy generated only 18,000 net jobs in June. And the number of jobs added in May was revised down to 25,000. The nation’s unemployment rate ticked up to 9.2 percent.

“Today’s jobs report confirms what most Americans already know: We still have a long way to go and a lot of work to do to give people the opportunity they deserve,” President Barack Obama said Friday morning in a statement on the June jobs report.

“The economy is not producing nearly enough jobs,” he said, adding that Congress should not wait to act on measures to boost job growth.

Businesses added the fewest jobs in more than a year in June. Governments cut 39,000 jobs. Over the past eight months, federal, state and local governments have cut a combined 238,000 positions.

The latest report offered evidence that that the recovery will be painfully slow. Two years after the recession officially ended, companies are adding fewer workers despite record cash stockpiles and healthy profit margins.

Friday’s disappointing jobs report surprised analysts, many of whom had expected job creation to rebound from a slump in May.

“Any way you cut this data, it’s lousy,” Diane Swonk, a senior managing director and chief economist for Chicago-based Mesirow Financial, told CNBC Friday.

Mark Zandi, chief economist of Moody’s Analytics, said the weak jobs report calls into question the strength of an expected economic rebound later in the year.

“I think this changes the dynamic of the debt ceiling debate,” Zandi told CNBC. “This kind of jobs number changes the dynamic of the discussion on fiscal policy. There will probably be an introduction of more [economic] stimulus.”

The struggling labor market is likely a headache for the Obama administration. It has struggled to get the economy to create enough jobs to absorb the 13.9 million unemployed Americans.

The economy is the top concern among voters and will feature prominently in Obama’s bid for reelection next year. So far, the economy has regained only a fraction of the more than 8 million jobs lost during the recession.

At the same time, the Federal Reserve — which wrapped up a $600 billion bond-buying program last week designed to spur lending and stimulate growth — appears unlikely to take any further steps to boost the economy.

U.S. Labor Secretary Hilda Solis on Friday called the meager addition of jobs in June disappointing and called for a speedy resolution of an impasse over raising the national debt ceiling.

“This job report isn't where it needs to be, it needs to be better,” Solis said in an interview on Bloomberg television. “People are waiting to see what’s going to happen here in Washington, D.C.," she said. "What we don't want do is continue to see just cuts that affect every sector. We don’t want to hurt the economic recovery.”

Economists have said that temporary factors have, in part, forced some employers to pull back. High gas prices have cut into consumer spending. And supply-chain disruptions stemming from the Japan crisis slowed U.S. manufacturing production.

The economy typically needs to add 125,000 jobs per month just to keep up with population growth. And at least twice that many jobs are needed to bring down the unemployment rate.

The economy and job market are remarkably weak two years after the recession officially ended. Unemployment has topped 8 percent for 29 months, the longest streak since the 1930s.

Unemployment has never been so high so long after a recession ended. At the same point after the previous three recessions, unemployment averaged just 6.8 percent.

There are signs that economy could improve in the second half of the year. Gas prices have come down since peaking in early May at a national average of nearly $4 per gallon. Prices averaged $3.59 a gallon nationwide on Friday, according to AAA.

And manufacturing activity expanded in June at a faster pace than the previous month, according to the Institute for Supply Management. That suggests the parts shortage caused by the March 11 earthquake in Japan is beginning to abate.

Still, the government said last month that the economy grew only 1.9 percent in the January-March quarter. Analysts are expecting similarly weak growth in April-June quarter.

The economy will grow at a 3.2 percent pace in final six months of the year, according to an Associated Press survey of 38 economists.

However, growth must be stronger to significantly lower the unemployment rate. The economy would need to grow 5 percent for a whole year to significantly bring down the unemployment rate. Economic growth of just 3 percent a year would hold the unemployment steady and keep up with population growth.