The US unemployment rate fell to 9.5 percent last month as more than half a million people abandoned the job hunt, fueling doubts about the economic recovery.
The Labor Department reported a net loss of 125,000 jobs last month even as unemployment fell to its lowest rate in almost a year. The falling jobless rate — down from 9.7 percent in May — offered some succor to President Barack Obama, who is running out of time to put the economy firmly back on track before congressional elections in November. “Make no mistake, we are headed in the right direction but… we are not headed there fast enough for a lot of Americans. We are not headed there fast enough for me either,” Obama said.
The White House has warned that unemployment will remain high for the rest of the year, while polls show it is a crucial issue with voters.
Most analysts had expected the ranks of jobless Americans to swell well beyond 15 million in June, pushing the unemployment rate up to 9.8 percent.
In the end the number of unemployed fell to 14.6 million in June as 652,000 Americans left the job market and more than 20,000 took up temporary posts. “The unemployment rate dropped because the labor force shrank even more rapidly as discouraged workers stopped looking for work,” said analysts at Societe Generale.
The report was akin to a Rorschach test for Wall Street, with some seeing the evidence of a slow recovery and others an ominous sign of problems ahead.
The biggest cause for concern had been the weakness of the private sector, which created a modest 83,000 jobs in June, well up from May’s revised total of 33,000.
Faced with an uncertain outlook and poor access to credit, US firms have been reluctant to rehire workers. The June figures also showed the evaporation of hiring for the 2010 Census, which had accounted for around 95 percent of new jobs in May. Census hiring fell back by 225,000.
Obama’s Republican foes said the report was further evidence of a stalled recovery, “Today’s report reinforces that the vast majority of new jobs added to the economy over the last several months have been temporary or government jobs,” said Congressman Eric Cantor.
But not everyone was so gloomy. “Despite the slightly larger drop in payroll numbers, there were some positive signs in this report,” said Jason Schenker of Prestige Economics. “A recovery is clearly underway, although it will be a slow one for the job market,” he added.
Either way the report looked unlikely to turn the page on a tortuous few months for the top 30 US companies, which have lost more than 10 percent of their collective value.
The continued weakness of the private sector has sparked calls for Obama to provide more government spending to restart the recovery. “The private sector is not yet poised to take over and sustain a robust recovery,” said Heidi Shierholz of the Economic Policy Institute, a Washington-based think tank.
But proponents of such a plan admit it will be nearly impossible as Washington zeroes in on elections in which government spending is likely to feature prominently.
Congress is currently locked in a bitter debate over extending unemployment insurance for over one million workers and is likely to balk at a wider spending package. “This is one of those cases where the political realities are completely at odds with economic sense,” she said advocating fresh stimulus of around 400 billion dollars. “I don’t know what is going on in the heads of these people, the economic case is so cut and dry, it is so clear what needs to be done.”
Washington, July 2, 2010 (AFP)
