U.S. employment took only baby steps forward in June.
Employers added 80,000 jobs in June. Private employers added 84,000 jobs and the government cut 4,000 jobs. Unemployment stayed at 8.2 percent.
“Instead of 80,000 you want 200,000,” Missouri Economist Neil Raymon said. “Keep in mind 80,000 is a tiny number when compared to the labor force. That kind of net change is hardly keeping up with the labor force”
In fact, 12.7 million people remain unemployed. Long-term unemployed, people unemployed more than 27 weeks, make up 41 percent of the unemployed.
The numbers are discouraging because job growth was strong in the first quarter. This is the third year in a row economic recovery has fallen off after a strong first quarter. In 2010, employers added 516,000 jobs in May before losses the next three months. In 2011, employers added more than 200,000 jobs each month from February to April before declining. Raymon said he wasn’t sure why this has occurred. He noted that the data is seasonal adjusted, so that isn’t the reason.
Raymon wasn’t sure when the GDP growth would get back to an acceptable 4 percent. He said it was hard to pin point what is causing the slow growth. He speculated low corporate confidence could lead to less hiring and less investment. He also said the scarcity of available credit and amount of people stuck in underwater mortgages – the value of their homes is less than what they owe – are dragging down consumer spending.
“It might be a sensible idea for the government to do more… making settlement arrangements,” Raymon said. “Maybe if those millions of household get back to normal than consumer spending will pick up and firms will have more confidence in the economy.”
As bad as job growth has been, Raymon said Europe’s problems could cause even more problems.
“Anemic job growth is a threat,” Raymon said. “It might not be as worrisome as what is going on in the Euro zone.”
U.S. Banks could end up holding European debt if those nations default. Or European nations could go back to old currencies and the exchange rate could be negative for U.S. banks. Furthermore, if the exchange rate goes negative for the EU some countries could slow down exports.
Partisan politics also pose a threat to the economy. The payroll tax is set to expire soon and federal spending is set to decline.
“The deadlock in Washington is cause for concern,” Raymon said. “There are tax increases and budget cuts set to happen at the end of the year. If the Democrats and the Republicans don’t do something about it, that could put the (GDP) growth rate into a negative.”
Alex Sagi contributed to this article