Known trouble zones drag down job market

WASHINGTON (Reuters) - The disappointing June employment report reflected well-known economic weak links, primarily housing and consumer spending.

Construction jobs dropped by 22,000, not a huge surprise considering weakness in both residential and commercial real estate. Retail was another drag, shedding jobs for a second straight month as consumer spending fades.

But the services sector, by far the biggest source of jobs, showed a net gain of 91,000 positions, more than four times the number created in May.

In all, the report confirms what investors already knew -- the labor market is healing painfully slowly, which means the recovery will likely remain sluggish.

THE GOOD

* Leisure and hospitality jobs jumped by 37,000 after a small decline in May. That points to some strength returning to discretionary spending.

* The jobless rate at 9.5 percent was far better than the 9.8 percent economists had forecast, although the shrinking work force had a lot to do with the decline. The workforce contracted by 652,000.

* The broadest measure of unemployment, which includes those who have given up the job search or are working part-time when they want a full-time post, fell to 16.5 percent in June. That was down one-tenth of a percentage point from May and six-tenths from April.

THE BAD

* The report showed declines in both the average number of weekly hours worked and hourly earnings for all private workers. Those readings had moved up in May, suggesting companies were squeezing more labor out of existing workers and would soon need to ramp up hiring.

* There is nothing in this report to suggest the economy is picking up any momentum, which suggests a long, slow slog back to normal employment.

(Editing by Chizu Nomiyama)