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Economy in Brief

U.S. Payrolls Fell for Sixth Month, Jobless Rate Stable at 5.5%
by Tom Moeller July 3, 2008

The Bureau of Labor Statistics reported that nonfarm payrolls fell 62,000 in June. While the decline was in-line with expectations, it was the sixth consecutive monthly drop and it brought the total loss of jobs this year to 438,000. During the last three months payrolls fell at a 0.6% annual rate. That compared to a rate of decline in excess of 2.0% by the end of the last recession.

Employment is surveyed during the week that contains the 12th day of the month. Therefore, the effect of floods in the Midwest will become apparent with the July jobs report.

During the second quarter, the level of aggregate hours worked (employment multiplied by hours worked) fell at a 0.9% rate from 1Q. With 2% growth in productivity assumed, that suggests 1% growth in real GDP.

Factory sector jobs fell another 33,000 and at 3.1% rate over the last three months. That was near the fastest rate of decline since 2003 but during the 2001 recession employment dropped at a 10% rate.

Construction sector employment dropped 43,000 and the rate of job loss has been exceptionally large. Falling at a 7.4% rate during the last three months it about matches the worst rate of job loss in the construction sector since 1991.

Hiring in the service sector continued to weaken. Jobs rose just 7,000 (0.7% y/y), compared to growth of 1.6% to 1.8% during the last three years.

This aggregate understates the weakening in private service sector jobs which fell 22,000 last month for the fifth decline in the last six months. The three-month rate of job loss of -0.2% compares to growth of 1.5% to 2.1% during the prior four years. Retail sector job loss has run at a 2.0% rate during the last three months. Jobs in the information sector also have been lost at a 1.7% rate, the same rate of decline as in the professional & business services sector. These declines have been offset by 4.6% growth in the number of jobs in education and by 2.4% growth health care jobs. The number of finance sector jobs have fallen at a 0.7% rate during the last three months while temporary help services jobs, often a leading indicator of employment growth, have been declining at an accelerated 12.3% rate. Real estate sector jobs have been shed at a 0.4% rate during the last three months which is an improvement from the 3% to 4% rates of job loss late last year and early this year.

Government sector jobs rose an upwardly revised 29,000, the same as during May, and have increased at a 1.5% rate during the last three months. Federal government hiring has been strongest and is up at a 2.8% rate during the last three months followed by 2.3% growth in state employment and 0.9% growth in local government hiring.

The one month diffusion index, which measures the breadth of job gain or loss (50 is the break-even level) continued to portend further job loss as it stood at 46.9%. The three- month index remained even weaker at 41.9%. The three-month figure for the factory sector was somewhat weaker at 31.0%.

In the Bureau of Labor Statistics household sector survey, the unemployment rate remained stable at 5.5% in June versus expectations for a slight decline. Employment fell a hard 155,000 after the 285,000 May decline. This measure of employment has been roughly unchanged since early-2007. The level of the unemployed rose 12,000 (21.5% y/y) after an 861,000 jump in May.

During June, the labor force fell 144,000 (+0.9% y/y) after its 577,000 surge in May. The labor force participation rate slipped month-to month to 66.1% from 66.2% versus 66.0% during all of last year and 66.2% in 2006.

The average duration of unemployment rose to 17.5 weeks from 16.6 in May. The figure now is on the rise versus the averages of the last two years.

Average hourly earnings increased a steady 0.3% and three-month growth was stable at 3.2% after 4.0% growth during 2006 and 2007. Factory sector earnings rose 2.6% y/y while private service sector earnings rose 3.7% y/y.

Global Financial Turmoil and the World Economy is yesterday's speech by Fed Governor Frederic S. Mishkin and it can be found here.

Employment: 000s June May April Y/Y 2007 2006 2005
Payroll Employment -62 -62 -67 0.0% 1.1% 1.8% 1.7%
      Previous -- -49 -28 -- 1.3% 1.9% 1.7%
  Manufacturing -33 -22 -52 -2.5% -1.9% -0.5% -0.6%
  Construction -43 -37 -59 -5.9% -1.0% 4.9% 5.2%
Average Weekly Hours 33.7 33.7 33.8 33.8 (June '07) 33.8 33.9 33.8
Average Hourly Earnings 0.3 0.3% 0.1% 3.4% 4.0% 3.9% 2.7%
Unemployment Rate 5.5% 5.5% 5.0% 4.6% (June '07) 4.6% 4.6% 5.1%
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