Payrolls in U.S. Fall 125,000

Payrolls in U.S. Fall 125,000; Jobless Rate at 9.5% (Update2)

By Bob Willis

July 2 (Bloomberg) -- Employment fell in June for the first time this year, reflecting a drop in federal census workers and a smaller-than-forecast gain in private hiring.

Payrolls declined by 125,000 last month as the government cut 225,000 temporary workers conducting the 2010 census, Labor Department figures in Washington showed today. Economists projected a decline of 130,000 payrolls, according to the median forecast in a Bloomberg News survey. Employment at companies rose 83,000. The jobless rate fell to 9.5 percent from 9.7 percent as the labor force shrank.

The pace of hiring signals it will take years for the world’s largest economy to recover the more than 8 million jobs lost during the recession that began in December 2007. The turmoil in financial markets brought on by the European debt crisis raises the risk that employment will slow, depriving American households of the income needed to maintain spending.

“Overall, it’s weak with very little breadth in new hiring,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets in Boston, who forecast a gain in private payrolls of 88,000. “This will lead to second-half consumption growth well below the first half.”

U.S. stock-index futures swung between gains and losses after the report. Futures on the Standard & Poor’s 500 Index rose 0.2 percent to 1,023.6 at 8:46 a.m. in New York after falling as much as 0.4 percent. The yield on the 10-year Treasury note fell to 2.92 percent from 2.95 percent late yesterday.

Employment rose a revised 433,000 in May, today’s figures showed. Payroll estimates in the Bloomberg survey of 82 economists ranged from a decline of 200,000 to no change after a previously reported gain of 431,000 jobs in May that was led by census hiring. Private payrolls were forecast to rise 110,000.

Private Employment

Private employment in June was led by gains in education and health services, transportation and leisure and hospitality. The report also showed declines in average hourly earnings and hours worked.

Economists surveyed also forecast the jobless rate, which fell to the lowest level since July 2009, would rise to 9.8 percent last month from 9.7 percent in May. The decline in June reflected a 652,000 decrease in the size of the labor force.

The decrease in census workers left 339,000 temporary employees still working on the survey, indicating more cuts to come that will keep distorting the employment figures for months.

For that reason, economists say private payrolls, which exclude government jobs, will be a better gauge of the state of the labor market for much of 2010.

Discouraged Jobseekers

Joblessness, which reached a 26-year high of 10.1 percent in October, will take time to recede as the number of previously discouraged jobseekers returning to the labor force exceeds the number of available jobs.

Manufacturing payrolls increased by 9,000 in June, the smallest gain this year and less than the survey median of a 25,000 increase.

Those gains may slacken as the industry leading the U.S. economic expansion cools. A report yesterday showed manufacturing expanded in June at the slowest pace of the year as orders and exports decelerated.

Sales and inventories “are very much in sync,” Samuel Allen, chief executive officer of Deere & Co., said in an interview June 23, in a reference to the manufacturer’s agricultural business. The Moline, Illinois-based company also has started adding stockpiles on the construction side in recent months, he said.

“We do believe the recovery is underway,” Allen said. “We do believe it is moving slowly. We do believe it is on stable ground at this time.”

Construction Down

Employment at service-providers decreased 117,000 after rising 420,000. Construction companies cut payrolls by 22,000 after reducing them 30,000 in May.

Delta Air Lines Inc., the world’s biggest carrier, will hire 700 airport ticket and gate agents to help handle increased summer traffic and operations disrupted by weather, Chris Kelly, a Delta spokeswoman, said June 18 in an interview. The new hiring is in addition to the 300 pilot and 300 reservation agent jobs recently filled by the Atlanta-based airline.

Average hourly earnings fell 2 cents to $22.53 in June, today’s report showed. The average work week for all workers declined to 34.1 hours in June from 34.2 hours the prior month.

Government payrolls decreased by 208,000. State and local governments employment declined by 10,000, while the federal government jobs dropped 198,000.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- decreased to 16.5percent from 16.6 percent.

The number of temporary workers increased 20,500. Payrolls at temporary-help agencies often picks up before companies take on permanent staff.

Obama Economy

President Barack Obama, after meeting with Federal Reserve Chairman Ben S. Bernanke June 29, said the U.S. economy is strengthening even as the European debt crisis has weakened financial markets.

“We have seen some very positive trends in a number of sectors,” Obama said at the White House after meeting with his economic advisers. “Unfortunately, because of the troubles we’ve seen in Europe, we’re now seeing some headwinds and skittishness and nervousness on the part of the markets.”

The economy, jobs and the budget deficit are likely to be top issues in November elections that will decide control of Congress. Heading into the campaign season, the administration is facing public pessimism about the direction of the economy.

The Fed last month said slowing inflation and the fallout from Europe’s debt crisis where among reasons it will maintain interest rates low for “an extended period.”