U.S. employers added 18,000 workers in June, less than forecast and the fewest in nine months, while the unemployment rate unexpectedly climbed, indicating a struggling labor market.
The increase in payrolls followed a 25,000 gain that was less than half the rise initially estimated, Labor Department data showed today in Washington. The median estimate in a Bloomberg News survey called for a June gain of 105,000. The unemployment rate rose to 9.2 percent, the highest level this year. Hiring by companies, which excludes government agencies, was the weakest since May 2010.
The absence of stronger job growth caused earnings to stagnate in June, which may keep a lid on consumer spending that accounts for 70 percent of the economy. The second-quarter slowdown in hiring underscores a recovery that Federal Reserve Chairman Ben S. Bernanke said is “frustratingly slow.”
“Firms are hesitant to commit to taking on new employees when customer demand is uncertain,” Guy LeBas, chief fixed- income strategist at Janney Montgomery Scott LLC in Philadelphia, said before the report. ‘It suggests consumer demand is sputtering. We’ll see downwardly revised third-quarter forecasts.” Estimates of the 85 economists surveyed by Bloomberg for overall payrolls ranged from increases of 40,000 to 175,000.
The unemployment rate was forecast to hold at 9.1 percent, according to the survey median. Estimates ranged from 8.9 percent to 9.2 percent.
Participate Rate Falls
The jobless rate rose even as the participation rate declined to 64.1 percent, the lowest since March 1984. The household survey showed a 445,000 decrease in employment and a 173,000 increase in unemployment.
Private hiring, which excludes government agencies, rose 57,000 last month after a 73,000 gain. It was projected to rise by 132,000, the survey showed.
Factory payrolls rose by 6,000 in June after a 2,000 decline in the previous month.
Employment at service-providers increased 14,000 in June, the least since a decline in September. Construction employment fell 9,000 workers and retailers added 5,200 employees.
Government payrolls declined by 39,000 in June, the eighth straight decline. Employment at state and local governments declined by 25,000.
Average hourly earnings fell 1 cent to $22.99, today’s report showed. The average work week for all workers dropped to
34.3 hours, from 34.4 hours the prior month.
The so-called underemployment rate — which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking — increased to 16.2 percent from 15.8 percent.
The number of temporary workers decreased 12,000. Payrolls at temporary-help agencies often slows as companies seeing a steady increase in demand take on permanent staff.
Recent figures had signaled the economy was starting to perk up after slowing in the first half of the year. Companies added twice as many workers as forecast last month, data from ADP Employer Services showed yesterday. An Institute for Supply Management report last week showed manufacturing unexpectedly accelerated in June.
Policy makers “expect the unemployment rate to continue to decline but the pace of progress remains frustrating slow,” Bernanke said at a news conference after the central bank’s June 21-22 monetary policy meeting.
The economy expanded at a 1.9 percent annual rate in the first three months of the year, and economists surveyed by Bloomberg from June 28 to July 7 forecast second-quarter growth of 2 percent. In the final three months of 2010, the economy grew 3.1 percent.
Fed officials have said the slowdown in economic growth in the first and second quarters partly reflected temporary factors. Manufacturers were hurt by supply disruptions in the aftermath of the earthquake in Japan, at the same time the surge in gasoline expenses limited spending on non-essential items by American consumers.
“The labor market is improving slowly,” Jenny Lin, senior U.S. economist at Ford Motor Co., said on a teleconference with analysts on July 1. “The economy is facing two temporary factors, which slowed growth — the fuel price run-up and Japan impact. Both of these are reversing now and set the stage for some improved readings in the months ahead.”
Companies reducing staff include Lockheed Martin Corp., the world’s largest defense contractor. Bethesda, Maryland-based Lockheed on June 30 said it plans to cut about 1,500 employees.
McLean, Virginia-based Gannett Co., the publisher of 82 newspapers including USA Today, also announced last month it is eliminating about 700 jobs.
Lack of faster progress in the labor market and in the economic recovery, which started in June 2009, has taken a toll on President Barack Obama’s approval ratings. Since he took office in January 2009, unemployment has increased by about a percentage point and the economy has lost 2.5 million jobs.
By a 44 percent to 34 percent margin, Americans say they believe they are worse off than when Obama took office, according to a Bloomberg National Poll conducted June 17-20.
Extracted from Bloomberg