Weak Job Growth Continues for Another Month

By Toni Vranjes

July 6, 2012

The pace of job growth was sluggish for yet another month.

Employers created only 80,000 jobs in June — a number that once again failed to live up to expectations. Economists had predicted that the nation would add 100,000 new jobs.

Meanwhile, as Election Day approaches, unemployment remains at the high level of 8.2 percent.

Job creation slowed dramatically in the second quarter of 2012. The average number of jobs created per month was 75,000 in the second quarter, compared to 226,000 in the first quarter.

For June, employment rose in professional and business services, health care, manufacturing, and wholesale trade.

In professional and business services, temporary-help services accounted for more than half of the increase. Diane Swonk, chief economist at Mesirow Financial, noted that temporary help is becoming the “new semi-permanent hire.”

“Firms can remain flexible in an uncertain environment by hiring on a contingency basis via consultants and temporary workers,” she wrote in a blog post.

Nevertheless, there were some positive signs in the latest employment report. Both the average workweek and average hourly earnings increased.

Overall, businesses are still very careful about hiring new full-time employees, said Nigel Gault, chief U.S. economist at IHS Global Insight. In a commentary, he wrote that the caution is being driven by uncertainties over:

  • the strength of global growth
  • the financial crisis in the Eurozone
  • the “fiscal cliff” (government spending cuts and tax increases that are scheduled to go into effect in 2013)
  • the November election

Given the disappointing job numbers, observers are wondering whether the Federal Reserve will take more steps to stimulate the economy.

According to Swonk, the new data may not be enough to prompt the Fed to launch a third round of “quantitative easing.” Under this approach, the Fed makes bond purchases in order to keep interest rates low. Federal Reserve policymakers will consider this option at their next meeting, which begins July 31.

Gault said that the weak report increases pressure on the Fed to try something more dramatic. He expects a third round of quantitative easing to be launched after another Fed program, known as “Operation Twist,” expires at the end of year.

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