Few Jobs, Unemployment Rate Grows

The monthly government unemployment report this morning far undershot expectations with few jobs added and an unemployment rate that just keeps growing.

The Bureau of Labor Statistics reported that non-farm payrolls grew by only 18,000 in June, and the unemployment rate grew to 9.2 percent from 9.1 percent in May.

It was the opposite of economists’ expectations.

Economists had expected non-farm payrolls to rise by 125,000 in June.

Dow Jones reports the numbers are the worst since September 2010, and some are now comparing the slow job growth to that of the 1930s.

"Doesn't sound like there's anything redeeming in the report," says Moody’s Mark Zandi, chief economist for Moody’s Analytics, on CNBC. And, he added, the June report calls into question the notion of growth in the second half of the year. "This can become self-reinforcing."

While the almost-universal reaction to the report was horror and fear that the economy may be heading toward a double-dip recession, one of the richest men in the nation remains optimistic despite the report.

Warren Buffett told Bloomberg Television he believes the 2.5 million jobs lost in the recession will come back.

"We have gone through, I don’t know how many recessions, perhaps 15 in the history of this country," he said. "But, our system over-shoots periodically. And in this particular case we had a huge bubble. So the fact that there’s a correction after that should not be unexpected. But our system always comes back and it will this time. And it already is."

The government’s report released at 8:30 a.m. today follows a release yesterday by payroll processor ADP that showed private employers had added 157,000 jobs in June. That report had raised hopes that the government’s measure would show improvement.

That didn't happen.

"This is a big bucket of very cold water, especially after the stronger-than-expected ADP report," said Ian Shepherdson of High Frequency Economics. "ADP is the single least-bad indicator of payrolls, but sometimes, without warning, it is very wrong. The details aren't quite as bad as the headline, with private payrolls up 57K, but that's still pretty terrible when compared to the 240K average as recently as the three months to April."

The private sector added 57,000 jobs, but cuts to federal, state and local governments dragged down job growth.

Even that private-sector growth is a huge disappointment and falls far short of what the economy needs to employ citizens. The job market has to grow by 125,000-150,000 just to absorb new entrants to the labor force, much less to provide jobs for those who are trying to get back into the workforce after being laid off.

Even that private-sector growth is a huge disappointment and falls far short of what the economy needs to employ citizens. The job market has to grow by 125,000-150,000 just to absorb new entrants to the labor force, much less to cut provide jobs for those who are unemployed.

June marked the third straight month the unemployment rate grew.

And if the rising unemployment rate and anemic job growth weren't bad enough, the report also shows that wages fell by a penny an hour, to $19.41 from $19.42.

The ugliness of the report has some economists calling on political leaders to back off deficit reduction talks and take unemployment more seriously.

"This is a remarkable, across-the-board backslide," said Heidi Shierholz of The Economic Policy Institute. "The president and Congressional leaders need to stop talking about deficit reduction and start talking about job creation."

Nobel-winning economist and New York Times columnist Paul Krugman called it, “a seriously ugly jobs report.”

And the liberal economist argued that unemployment report is evidence Washington needs to take more action to stimulate the economy, instead of pursuing the current deficit cuts being debated.

“The situation cries out for aggressively expansionary monetary and fiscal policy. Instead, however, all the political push is in the opposite direction,” Krugman writes.

On the other side of the political spectrum, a group called Generation Opportunity, led by Paul Conway, former chief of staff to President George W. Bush's Labor Secretary, Elaine Chao, is calling on politicians to address the debt as part of a job-creation strategy for young Americans.

"Young Americans demand real solutions, not more rhetoric. As they continue to look for work and new opportunities to use all their talents — they expect those who they elected to do their jobs and fully address the debt, decrease Federal spending and regulation and create an economic environment where individuals have the freedom to pursue their dreams,” Conway said.

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Kent Bernhard Jr. is News Editor of Portfolio.com