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When wandering in the desert, beware shimmering water on the horizon. If May’s better-than-expected jobs report offered the dehydrated US labour market hope of succour, June’s miserable effort was a mouthful of sand. Nonfarm payrolls, including a drop in public sector employment related to the Census, fell by 467,000, more than 100,000 worse than expected. A jump in unemployment among teenagers may mean school leavers are affecting the figures. But there remain concerns.
Those out of work choosing to leave the labour force helped contain the rise in unemployment, now at 9.5 per cent. This is a volatile measure. But if the disheartened are only now ceasing their search for work, that suggests a drawn out period in which they rejoin the labour force, lifting the unemployment rate. And they are right to be discouraged: the mean duration of unemployment is rising, points out Forward Capital, while at 54 per cent, the proportion of the unemployed permanently, rather than temporarily, laid off is at its highest since records began.
That points to a slow recovery. But worse, there are precious few signs of life at all in this data. Temporary hiring, which tends to recover early, deteriorated sharply after marked improvement in May. Another leading indicator, the average working week, fell to a new record low of 33 hours. One teeny bright spot was a rise in the manufacturing work week. But this remains far shy of the level indicating serious rebuilding of inventories. Slowing growth in weekly earnings, now at 2.7 per cent year on year, is another serving of angst. And falling hours plus sluggish wages mean a further drag on US consumption – already constrained by debt-laden household balance sheets and tight credit. The mirage, and with it hopes of a speedy recovery, has vanished.
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