Tepid jobs report puts more pressure on Fed

July 06, 2012

Tepid jobs report puts more pressure on Fed

July 9, 2012 – NAFCU believes the Federal Reserve is likely to face even more pressure to support further monetary easing due to June's disappointing job numbers.

The Bureau of Labor Statistics reported Friday that non-farm payrolls in June rose by 80,000, much weaker than expected. The data meant that payrolls have expanded by an average of 75,000 per month in the second quarter, down from 226,000 per month in the first quarter.

Weakness was fairly widespread among the different job sectors, with the notable exceptions being the manufacturing, health care, and business and professional services sectors.

NAFCU Chief Economist David Carrier pointed out that an earlier Labor Department report showed a significant decline in new unemployment claims, "which created some optimism that conditions weren't quite as bad as what the June report indicated."

Average hourly earnings for all employees increased 6 cents (26 basis points) to $23.50 in June. On a year-over-year basis, average hourly earnings were up 2 percent, a rate that is outpacing inflation.

The unemployment rate, which is derived from separate data, held at 8.2 percent. The bureau estimates that there are currently 12.7 million unemployed people in the labor force, with 41.9 percent out of work for six months or longer. Those numbers do not take into account the 821,000 discouraged workers who have given up looking for work.

NAFCU does not expect the struggling employment situation and tepid economic growth to turn around anytime soon, especially with the uncertainty generated by deteriorating economic conditions in Europe and Asia and the impending fiscal cliff in the U.S., Carrier said.

The Federal Open Market Committee, the Fed's policy making arm, will hold a two-day meeting July 31-Aug. 1.

For more, see NAFCU's Macro Data Flash (login required).

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