(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 further imperiling President Barack Obama’s chances of reelection in November.
* The Labor Department said on Friday non-farm payrolls expanded by just 80,000 jobs in June, falling short of forecasts though a tad higher than a revised May reading of 77,000.
* Job creation during the month wasn’t enough to bring down the country’s lofty 8.2 percent unemployment rate. The report appeared sure to fuel concerns that Europe’s debt crisis is shifting the U.S. economy into low gear.
“It continues to be a disappointment. It’s very consistent with business leaders lacking conviction with what the future holds. The uncertainty about the world continues to affect their decision to hire workers.
“I suspect the Fed will respond with more accommodation. You could see something as early as next month. They will pursue another round of quantitative easing, but you are seeing a diminishing return on quantitative easing. I suspect they will focus to mortgages. They will try to drive mortgage rate even lower even though housing is showing signs of stabilizing.
“Borrowing is below the rate of inflation and at negative real rates in some cases. It’s a good time to be a borrower.”
OMER ESINER, CHIEF MARKET ANALYST, COMMONWEALTH FOREIGN EXCHANGE, WASHINGTON D.C.:
“The jobs report was another disappointing report, especially given the upside saw in yesterday’s ADP which had some people revising up today’s number. The revision over the past two months canceled each other out. Overall, it was another lackluster report but should not change forecasts for Fed action in any meaningful way. While it is not enough to increase calls for QE3, it was also not enough to take QE3 off the table. We are still in data-watching mode in the U.S. in terms of Fed policy.”
“Sadly we continue to see the U.S. employment picture deteriorate. It’s another point the Fed will look at, making it more likely to initiate QE3. It certainly doesn’t determine anything (on QE3) one way or the other, but it’s another dovish indication for the Fed.”
CARL RICCADONNA, DIRECTOR AND SENIOR U.S. ECONOMIST, DEUTSCHE BANK SECURITIES, NEW YORK:
“This report is roughly in line with expectations. The gains were fairly diffuse across industries so that’s good news. Certainly, we don’t like to see sub-100,000 job growth, but the rise in temp jobs suggests we could see some pickup in employment in the months ahead. The ADP figures and the employment component of the non-manufacturing ISM report also support that idea.”
NIGEL GAULT, CHIEF U.S. ECONOMIST, IHS GLOBAL INSIGHT, LEXINGTON, MASSACHUSETTS.
“People thought it might get a little better and I thought it might get a little better after yesterday’s ADP report but it didn’t. It’s very much as the same sort of area as the previous three months.
“It’s really very much the same story as the past several months. We’re just crawling forward here, creating a few jobs. Not enough to do anything on the unemployment rate.
“People were looking for something better, some indicator that may show we’re crawling out of this trough. But everything here says we’re still in it.”
JOHN DOYLE, SENIOR STRATEGIST AT TEMPUS CONSULTING, WASHINGTON:
“Obviously it’s a disappointing number again. We’re expecting some sluggish growth but after yesterday’s slightly better-than-expected ADP, we were hoping to maybe get something up (around) 140,000 in nonfarm payrolls. Obviously, we’re still under that.
“In terms of the U.S. dollar for the day, this might add to the general risk-off sentiment that we’ve seen throughout the week and that might provide a catalyst for the dollar to gain slightly more against the higher-yielding currencies.
“For dollar/yen, that’s going to be the tough one as usual. In the market this way, you might expect the yen to gain against the U.S. dollar as you’re seeing now as it will be the preferred safe-haven currency for today.”
JEFF SAVAGE, REGIONAL CHIEF INVESTMENT OFFICER FOR WELLS FARGO PRIVATE BANK IN THE NORTHWEST, PORTLAND, OREGON:
“The markets are not going to like this number in the least. It seemed like going into this number everybody was expecting about 100,000, the last couple of days it looked like most numbers went up to 125,000. Comes in at 80,000 - a poor number and a very political number and it will not sit well with the market. There is no question that the QE3 conversation becomes very alive in the coming days and weeks.
“If there is any piece of bad news, Europe is going to get blamed. The fact is this is a positive number, it is a plus 80,000. It does cap one of the worst quarters we have seen in years and so that will obviously get some headlines here too - that the quarterly number was terrible. Where do you go with the blame on this one - there are just so many places to talk about. Frankly, if you are an American employer, with the uncertainty that you have in front of you for the next six months, there is just no reason to go out and do a lot of hiring right now.”
GUS FAUCHER, SENIOR MACROECONOMIST, PNC FINANCIAL SERVICES, PITTSBURGH:
“It’s disappointing because it’s below 100,000, especially after the ADP report. May was revised up slightly. The household number is higher at about 128,000 so there is some solace there.
“Education and healthcare were weak but that could be due seasonal factors.
“Europe and the recent weakness in the stock market is holding back hiring. It’s confidence at this point.
“At this point we had the third straight month of job gains below 100,000. The Fed should be nervous. It’s their job to promote steady employment growth. They need to take more decisive action. I would like them to buy mortgage-backed securities. The spread between Treasuries and mortgage rates have widened so the Fed could do more there.”
CARY LEAHEY, ECONOMIST AND MANAGING DIRECTOR, DECISION ECONOMICS, NEW YORK:
“It’s a weak report at first blush, but it doesn’t look as if the tone is any different from the last couple of months. There’s no meaningful difference between growth of 75,000 jobs and growth of 80,000 jobs. The market will see this as increasing the possibility that QE3 is coming — perhaps at the July Fed meeting.
“Other components of the report are actually pretty good. The workweek is up and manufacturing hours also went up a tenth of a percent, too. This is the best gain in total hours worked in four months and it’s going to give you a decent increase in industrial production. But the market may not care about these aspects of the report with the headline non-farm payroll jobs growth below 100,000.”
STOCKS: U.S. stock index futures added to losses
BONDS: U.S. bond prices rose slightly
FOREX: The dollar rose modestly against the euro
Americas Economics and Markets Desk; +1-646 223-6300