New jobless numbers fuel debate

By DIANE STAFFORD
The Kansas City Star

The argument over whether more government stimulus is needed to spark the economy intensified Friday with an anemic jobs report.

While the unemployment rate fell to 9.5 percent in June from 9.7 percent in May, the decline occurred not because employers added jobs but because a huge number of workers — 650,000 — dropped out of the labor force. Workers not searching for jobs are not counted as unemployed.

In all, employers cut 125,000 payroll jobs. About 225,000 temporary U.S. census jobs ended, while private sector employment scored a paltry gain of 83,000 jobs.

With 14.6 million unemployed workers — 6.8 million of them out of work for six months or more — the pressure intensified on government to do what business hasn’t done: Create jobs.

President Barack Obama said the report was evidence that economic growth was occurring, but not quickly enough, and he called for expansion of the government’s economic stimulus programs.

Republican opponents countered that government stimulus efforts so far have failed.

“The government cannot orchestrate lasting economic growth,” said Rep. Sam Graves of Missouri, ranking Republican member of the Committee on Small Business. “Propping up our economy with temporary jobs and bailouts fosters an atmosphere of uncertainty, not stability.”

Many economists were hoping to see more private-sector job growth, which would fuel the economy by boosting consumers’ ability to spend.

“It could have been worse, but it wasn’t good,” said Nigel Gault, chief U.S. economist at IHS Global Insight, an economic forecasting firm. “It’s adding to the evidence that growth has slowed.”

People left the work force “because they think there’s nothing out there,” he added.

In a separate report, factory orders fell by 1.4 percent in May, the Commerce Department said. It was the first decline after nine months of gains and the biggest drop since March 2009.

The reports Friday followed a slew of data and developments that pointed to slower growth in the months ahead. The stock market capped the week with another down day, with the Dow Jones industrial average on Friday sliding 46.05 to 9,686.48.

The jobs report showed that few industry sectors have ramped up their hiring pace. Private-sector employment has grown by an average of only 98,000 jobs a month since January, but in June it remained 7.9 million jobs below December 2007, when the recession began.

At that pace, it would take more than six years to return to pre-recession employment levels.

“Cautiousness to hire workers at a stronger pace shows that employers believe a self-sustainable economic recovery is not as strong as it was a few months ago,” said Dave Huether, chief economist for the National Association of Manufacturers.

The job market numbers kept attention on Congress, which recessed for the Fourth of July holiday without passing another emergency federal extension of unemployment benefits. About 1.3 million laid-off workers have exhausted their eligibility for jobless benefits.

Democrats have been unable to push through a benefits extension, which, they argue, would provide economic stimulus in this consumer-driven economy by putting money into the hands of the jobless.

“We have to put money in the hands of people most likely to spend it,” said Christine Owens, executive director of the National Employment Law Project. “That means continuing effective stimulus provisions like unemployment insurance in order to increase consumer activity, boost local economies, promote job creation and keep the million of jobless Americans afloat until they can find work again.”

Republicans have rejected a benefits extension costing about $35 billion in favor of limiting growth in the federal deficit.

Even with government stimulus money for infrastructure projects, construction employment fell to a 14-year low in June, the Associated General Contractors of America said.

“The stimulus has helped,” said Stephen Sandherr, chief executive of the contractors association, “but any gains the industry experienced will evaporate unless Congress and the administration promptly enact long-term spending bills for transportation, water, wastewater, rivers and harbors.”

Diana Furchtgott-Roth, director of the Center for Employment Policy at the Hudson Institute, said: “It’s natural that employers are afraid to hire, since their taxes will go up on Jan. 1, 2011.”

She also cited fear about higher energy bills if cap-and-trade legislation passes, concern that future financial regulations might make it more difficult to borrow, and worries about possible future fines for not providing health insurance required by the reform law.

Even for the majority of Americans who remain employed, the June report painted a less-than-satisfactory picture of the economy.

The average workweek slipped by 0.1 hours to 34.1 hours, meaning slightly less pay for hourly workers.

Average hourly earnings of all employees in the private, nonfarm sector fell by 2 cents, or 0.1 percent, to $22.53. From June 2009 to June 2010, average hourly earnings have risen 1.7 percent.

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By DIANE STAFFORD, The Kansas City Star, 7/2/2010