The economy isn't getting worse — it's just not improving as quickly as everyone hoped.
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The disappointingly high number of jobs lost last month points to very weak economic growth during the late summer and fall as the nation moves slowly out of recession. We still see a recovery beginning later this year, but growth will be tepid at best. Having fewer people working and those employed working fewer hours will diminish consumer income and consumer spending. Mark Zandi, chief economist with Moody's Economy.com, thinks that job losses will continue. "We won't see job growth until the second half of 2010," he says.
The Labor Department says the net job loss in June was 467,000. The May total was revised to 322,000 jobs lost instead of 345,000. The unemployment rate inched up to 9.5% from 9.4%. John Silvia, chief economist with Wachovia Corp., says those numbers don't tell him the economy is getting worse. "We're just not improving as much as people hoped. The idea of job growth by the end of this year is out the window."
Job losses hit almost all sectors of the economy, and while the total is less severe than it was during the first few months of this year, it's still a lot. The jobs lost in June bring total employment to 131.7 million. Heidi Shierholz, labor market economist with the Economic Policy Institute, a think tank in Washington, D.C., says that we're back to where we were about nine years ago.
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Even when jobs begin to increase, the unemployment rate will stay high, peaking at well above 10% next spring. That's because it takes a monthly job increase of about 127,000 just to keep the jobless rate unchanged. The jobless rate continued to rise for 15 months after the end of the 1991 recession and 19 months after the 2001 recession. "So the view of a peak next spring is a bit hopeful," Shierholz says.
Although there are fresh signs that manufacturing production is on the rise again, the improvement isn't translating into job gains. In June, manufacturing shed 136,000 jobs as companies remained very cautious about adding to their payrolls in case the economy takes a turn for the worse again.
Health care once again stands out as the only sector showing much job growth. But June's increase of 21,000 is below the average monthly gain of 30,000 in 2008.
Adding to the dismal picture, the average workweek dipped to 33 hours from 33.1 in May, setting a new low for this number, which goes back to 1964.