US: Inglorious report

EcoFlash

For three months in a row, non-farm payrolls were below 100k. The 3-month moving average, at 226k in March, fell to 75k in June. The marked slowdown in employment growth threats the resilience of the US economy witnessed until recently. Clearly the report lays ground for additional QE.

The June labour market report confirmed the lower trend in hiring witnessed since April. At 80k job creations, June is the third month in a row where non-farm payrolls were below 100k. April and March were marginally revised, respectively up and down. In sum, revisions subtracted 1k jobs to the prior two months. The 3-month moving average, at 226k in March, fell to 75k in June.

The underlying details showed that private sector only created 84k jobs, the weakest performance since August 2011. Payrolls change in the manufacturing sector slightly accelerated (+11k vs +9k in May) but the big hit intervened in the private service sector where job creations declined to 71k after +126k in May. In the construction sector, jobs increased by 2k, reversing the seasonal job destruction trend.

The household survey shows the unemployment rate remained unchanged at 8.2% so as participation rate, at 63.8%. Employment was up 128k (against +422k in May) and the number of temporary workers increased by 25.2k (+18.6k in May). U6, the largest measure of unemployment rate (adding employed part time for economic reasons and people marginally attached to the labour market including discouraged workers) increased from 14.9% in May to 16.2% in June.

Against the backdrop of a deteriorating global environment, the marked slowdown in employment growth threats the resilience of the US economy witnessed until recently. The manufacturing ISM released on Monday (49.7) already showed US manufacturers have finally been catched up by the recession threatening the euro zone and the slowdown in Chinese activity.

The United States need more hiring to withstand the weakening of external demand and generate GDP growth by its own. After a jobless recovery, productivity gains are trending down meaning that to boost production volumes, the number of employees must also increase. Clearly additional QE would be helpful.

Published On Fri, Jul 6 2012, 16:00 GMT Previous entries

Thibault Mercier

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Expert in Spain, Portugal, Greece and Ireland.

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