US Economy: June Job Creation Points to Slowdown
Washington, July 7 (Bloomberg) -- U.S. companies hired fewer workers than expected in June, even as unemployment slipped to 4 percent, a sign the yearlong series of Federal Reserve interest- rate increases is helping rein in the economy.
Businesses added 206,000 jobs last month after shedding 165,000 in May, Labor Department figures showed. Analysts had forecast an increase of 250,000. Payroll additions by companies in the first six months of the year also were the smallest in 4 1/2 years.
Taking into account a drop in government jobs as temporary hires for the 2000 Census completed their work, total employment grew by 11,000 in June. That's down from an increase of 171,000 in May, when the jobless rate was 4.1 percent, and the smallest increase since a blizzard paralyzed parts of the East Coast in January 1996.
Stocks and Treasury securities rose as investors wagered the Fed's six interest-rate increases in a year will slow the economy just enough to keep inflation in check, keep corporate profits rising and prevent Fed policy-makers from raising interest rates at their Aug. 22 meeting. ``We are indeed in an economy that's behaving pretty much like a tame lion,'' said Oscar Gonzalez, an economist at John Hancock Financial Services Inc. in Boston.
Labor Department officials said last month's drop of 195,000 government jobs was directly related to the end of Census work. At the same time, manufacturing, construction and retail jobs barely rose after declines in May.
Fewer Hires
So far this year, businesses have added an average of 177,000 jobs a month, compared with 202,000 a month for all of last year, the Labor Department said. This year's hiring by companies is the slowest since the last six months of 1995 when private industry added 175,000 jobs a month.
The Labor Department also reported that workers' average hourly earnings rose 0.4 percent, or 5 cents during June. That followed a 0.1 percent gain in May and was in line with analysts' expectations. Labor expenses represent about two-thirds of the cost of doing business.
The Treasury's 10-year note rose 3/8 point in late afternoon trading, pushing down its yield 4 basis points to 6 percent. The Dow Jones Industrial Average rose 155 points, or 1.5 percent, to close at 10635.98. The Nasdaq Composite Index gained 63 points, or 1.5 percent, to close at 4023.20.
Some analysts questioned the market reaction. A record-low pool of available labor and an unemployment rate close to April's 30-year low of 3.9 percent may suggest ``the U.S. economy is running out of workers rather than a dramatic decline for demand for help,'' said Richard Yamarone, senior economist at Argus Research Corp. in New York.
By category, services employment fell 2,000 in June after rising 209,000 in May. The loss of services jobs was the first since August 1997 and reflected the drop in government jobs. Construction employment rose 3,000 last month after dropping 24,000 a month earlier. Factories added 8,000 jobs in June following a loss of 12,000 in May.
Labor Pool
The available labor pool -- combining the number of unemployed job seekers, plus those not looking for work in the last 12 months but who said they would take a job -- fell to a record-low 9.8 million in June from 10.2 million in May.
The government's monthly job growth figures are based on statistics provided by businesses, while the unemployment rate is based on a survey of U.S. households.
Evidence of a slowdown in the economy is mounting. Manufacturing expanded in June at the slowest pace in 17 months, according to the National Association of Purchasing Management's factory index released earlier this week.
Also, an increasing number of steel buyers plan to reduce purchases in the third quarter because they expect less demand for ships, railcars and appliances, a survey by Salomon Smith Barney showed today. Half of those surveyed said they will curtail purchases, compared with 7 percent in a March survey.
Sales at U.S. retail stores open at least a year rose 3.4 percent in June, the smallest increase in almost three years, according to the Bank of Tokyo-Mitsubishi Ltd.
La-Z-Boy Inc., the No. U.S. maker of reclining chairs, said today that it expects fiscal first-quarter earnings will be below analysts' estimates as sales in the furniture industry slow.
``Consumer furniture purchases across the country have softened in the past quarter, apparently in reaction'' to the Fed rate increases and higher gasoline prices, said Gerald Kiser, the Monroe, Michigan-based company's chief operating officer. ( Edit: maybe it is because people are too busy working OT to sit around in a La-Z-Boy)
Retail Employment
Retail jobs rose 49,000 in June after a 116,000 drop in May, the Labor Department reported. During the first half of the year, retail employment growth averaged 32,000 a month, about the same as for all of 1999.
Jobs at finance, insurance and real estate companies dropped 6,000, the fourth straight monthly decrease. Merrill Lynch & Co. is considering cutting 2,000 jobs from its brokerage unit, or about 5.4 percent of the total, the Wall Street Journal reported, citing people close to the firm.
The biggest U.S. broker would eliminate marketing, strategy and technology jobs from its retail unit, which employs about 37,000 people, the Journal said. The cuts would exceed earlier estimates for several hundred job losses and could save the firm as much as $150 million a year.
Profits on Wall Street are slowing as income from trading, investments and investment banking slide, analysts said. Eliminating 2,000 jobs would be the biggest reduction since 1998, when Merrill slashed 3,400 positions following Russia's default on its debt.
Jul/07/2000 16:13 ET |
