Dismal hiring shows economy stuck in low gear
WASHINGTON (Reuters) - U.S. employers hired at a dismal pace in June, raising pressure on the Federal Reserve to do more to boost the economy and dealing another setback to President Barack Obama's reelection bid.
The Labor Department said on Friday that non-farm payrolls grew by just 80,000 jobs in June, the third straight month below 100,000.
Job creation was too weak to bring down the country's 8.2 percent jobless rate and the report fueled concerns that Europe's debt crisis was shifting the U.S. economy into low gear.
"We're just crawling forward here," said Nigel Gault, an economist at IHS Global Insight in Lexington, Massachusetts.
While Obama holds a narrow lead in most national polls, many voters are critical of his handling of the economy. Speaking at a campaign rally in Ohio, Obama said the pace of job creation needs to pick up.
"It's still tough out there," he said.
Mitt Romney, Obama's Republican challenger, assailed the president for not doing enough to get people back to work.
"This kick in the gut has got to end," Romney told reporters in New Hampshire.
U.S. stocks closed about 1 percent lower, while yields on U.S. government debt fell on bets the Fed would launch a new round of bond purchases to lower borrowing costs and spur hiring. The dollar fell against the yen, but rose against the euro as investors sought a safe haven.
Last month, the Fed extended a program aimed at keeping long-term interest rates down and said it was prepared to do more to spur the economic recovery if needed.
The somber jobs report could move the central bank closer to a third round of so-called quantitative easing, or QE3.
Reuters polled 16 primary dealers - the large financial institutions that do business with the Fed - and found 12 expect QE3 by year-end, with eight expecting it either at the Fed's next meeting, which wraps up on August 1, or its subsequent gathering in September.
"You could see something as early as next month," said Brian Levitt, an economist at OppenheimerFunds in New York.
Economists estimate roughly 125,000 jobs are needed each month just to hold the jobless rate steady. During the second quarter, job creation averaged 75,000 per month, down from an average of 226,000 in the first quarter.
Part of the slowdown could be because mild weather led companies to boost hiring during the winter at spring's expense.
But weakness in everything from factory activity to retail sales suggests something more fundamental is at play and the jobs data buttressed that view.
In June, factories added 11,000 workers and construction employment edged up 2,000, the first gain since January and further evidence the long-depressed housing market is steadying.
However, hiring slowed sharply in the services industry, with retailers cutting 5,400 workers. Overall, private-sector hiring was the weakest since August.
UNCERTAINTY AND INSTABILITY
Debt woes have bogged down much of Europe, sending some countries into recession. The crisis in turn has dulled economic growth around the world and central banks in China, the euro zone and Britain all eased monetary policy on Thursday.
Europe is not the only weight on the U.S. outlook. Washington plans enough belt-tightening at the start of 2013 to easily send the economy into recession if Congress and the White House cannot find a way to avoid this "fiscal cliff."
Until recently, the United States had been a relatively bright spot in the global economy, especially in manufacturing, and most economists still expect lackluster growth over the rest of 2012 rather than a slip toward recession.
Although jobs growth in June fell short of economists' already subdued expectations for a 90,000 gain, the report did offer some hopeful signs.
Average hourly earnings rose 6 cents, the biggest increase in four months.
In addition, a measure of total hours worked hit its highest level since November 2008, suggesting business is brisk enough for employers to demand more from workers, even as they hold the line on hiring.
Temporary employment rose by the most in four months.
"I think a lot of that has to do with the uncertainty that everyone's feeling," said Joanie Ruge, an analyst at temporary staffing company Randstad Holdings US. "Employers are not feeling like things are stable."
- Obama critic D'Souza spared prison for violating election law
- U.S. and Arab allies launch first strikes on militants in Syria |
- Fired UPS worker kills two supervisors, self, in Alabama shooting
- Israel downs Syrian warplane it says violated its Golan airspace
- Argentina's Fernandez to meet billionaire investor Soros in New York