July 3, 2008 / 1:02 PM / 11 years ago

WRAPUP 2-U.S. extends job loss streak, more pain seen ahead

* June payrolls drop marks sixth straight month of losses

* April, May revised down; private employment plunges

* Average hourly earnings rise decelerates year-on-year

* Spike in jobless claims suggests further weakness

(Recasts first paragraph, updates market reaction, adds details)

By Alister Bull

WASHINGTON, July 3 (Reuters) - U.S. employers cut workers from their payrolls for a sixth straight month in June for the longest losing streak for the labor market since 2002, and a jump in first-time claims for jobless benefits points to more weakness ahead.

The Labor Department said on Friday that 62,000 nonfarm jobs were lost last month, bringing jobs shed for the year so far to 438,000 as housing market woes chilled growth. The unemployment rate, which shot up sharply in May, held steady at 5.5 percent.

A separate report showed new applications for jobless benefits hurdling to 404,000 last week, a level associated with recession in the past that suggests further weakness ahead for employment.

“It shows that the labor market still is very soft. We’re not seeing dramatic job cuts, but clearly companies are trying to hold the line on costs,” said Gary Thayer, senior economist at Wachovia Securities in St. Louis.

U.S. stock futures rallied as investors breathed a sigh of relief that the data was not even more dire. Shares were helped by a rise in the value of the dollar against the euro as the head of the European Central Bank suggested a rate hike on Thursday could be the last for awhile.

Analysts polled by Reuters had expected the unemployment rate to edge down to 5.4 percent and had expected the economy to shed 60,000 jobs.

The weak tone of the report was buttressed by downward revisions to both May and April’s employment count that took their combined job losses to 129,000, compared with an early estimate of 77,000 jobs lost.

In June, the creation of 29,000 government jobs helped support payrolls. Private-sector employment dropped by 91,000.

TAME WAGES

Average hourly earnings, closely watched by the Federal Reserve as it monitors price pressures to make sure they do not creep into higher wages, edged up six cents, or 0.3 percent in June to $18.01.

However, over the past 12 months earnings have risen just 3.4 percent, the lowest reading since January 2006.

The Fed last week halted an aggressive interest-rate cutting campaign, holding overnight U.S. rates at 2 percent and warning that inflation risks had risen amid soaring energy and food prices. The central bank had been cutting rates to shield growth from a collapsing housing market.

“It does show that the Fed has to hold policy steady for now,” Thayer said of the data. “We’ve now seen job cuts all year long and that suggests that raising interest rates now would probably hurt the economy significantly.”

The six-month streak of job losses was the longest consecutive period of shrinking payrolls since employment fell without respite from from March 2001 until May 2002, a period that corresponds to the last U.S. recession and the beginning of a jobless recovery.

There were 43,00 jobs lost in construction in June as the housing slowdown continued to bite, while manufacturing shed 33,000 jobs. Both of these sectors have lost jobs in every month over the past year.

Jobs in the professional services sector declined by 51,000 as the financial services and real estate industries continued to suffer the country’s housing market woes.

Flooding in the Midwest had no impact on June’s employment report, the Labor Department said, holding out the possibility of additional pressure on the jobs market in the coming months as flood-related job losses get counted.

The separate report on jobless claims showed initial filings jumped by 16,000 last week to 404,000.

The four-week average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, increased for the fourth straight week to 390,500, the highest reading since October 2005 in the aftermath of Hurricane Katrina. (Reporting by Alister Bull, editing by Andrea Ricci)

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below