Employers Show Lack Of Confidence

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AP
Employers boosted payrolls by a tepid 121,000 in June — an improvement from the previous month but new evidence that companies are reluctant to bulk up their work forces in the face of high energy prices and slowing economic growth. Wages rose sharply.

The Labor Department's fresh snapshot of job activity released Friday also showed that the nation's civilian unemployment rate held steady at 4.6 percent.

"To me this suggests this economy is cooling off a bit quicker than the Fed thinks it is," David Wyss, chief economist of Standard & Poor's, told CBS Radio News.

The pickup in payrolls last month followed a gain of 92,000 in May, which turned out to be slightly higher than the 75,000 positions first reported. April's payrolls, however, turned out to be lower, showing a gain of 112,000, rather than the 126,000 previously estimated.

"This is the third month in a row that the payroll numbers have been disappointing," said Wyss.

The count of new jobs added in June was the most since March but fell short of economists' forecasts for an increase of 160,000 new positions.

"This is a very subpar economic recovery and it looks like the labor market is actually decelerating," Ron Blackwell, chief economist of the AFL-CIO, told CBS Radio News. "The only bright spot in this report was an eight-cent increase in the avearage wage, which, if it were to persist, and again, it's against the trend, would represent a real increase in income."

Workers' average hourly earnings jumped to $16.70 in June, a sharp 0.5 percent increase from May. Economists were expecting a more modest rise of 0.3 percent. For the last 12 months, wages have gone up by 3.9 percent, the largest annual increase since June 2001.

Wage improvement is good for workers but a rapid sustained acceleration can ignite inflation concerns.

To fend off inflation, Federal Reserve Chairman Ben Bernanke and his colleagues bumped up interest rates last week to their highest point in more than five years.

The Fed left the door open to another increase — depending on how inflation and economic activity unfold — at its next meeting on Aug. 8.

"It's time for the Federal Reserve to stop raising interest rates and start worrying more about the economy," said Wyss.

In June, weakness in construction and retailing — two sectors that shed jobs — tempered overall employment gains. Financial companies, education and health services, government and even manufacturers were among those boosting jobs.

It's a tricky time for some employers to figure out exactly where the economy is heading — and thus to what extent they need to add or shed workers.

"In terms of growth and in terms of profits, it's a very strong recovery. But in terms of jobs and in terms of wages, it's the weakest labor market recovery of any since the end of World War II," said Blackwell.

The economy probably logged growth of around a 2.5 percent pace in the April-to-June quarter and could clock in close to 3 percent in current July-to-September period, analysts said. That would mark a considerable slowdown from the first quarter's 5.6 percent pace, the fastest in 2 ½ years.

Even as the economy has slowed, inflation — led by surging energy prices — has moved higher.

Oil prices closed at a new record high of $75.19 a barrel on Wednesday. Gasoline prices have topped $3 a gallon in some cities.