Signs Of A Slowdown
The Labor Department reported Friday that the jobless rate fell by 0.1 percentage points from 4.1 percent in May, right on target with many analysts' expectations. In April, the unemployment rate hit a 30-year low of 3.9 percent.
Total employment including government workers rose by only 11,000 in June as 190,000 temporary workers finished work on the census and left their jobs. Thats the slowest growth rate in four years. And although private employers added 206,000 positions during the month, it was fewer jobs than many analysts expected.
CBS News Correspondent Richard Schlesinger reports on Wall Street Friday, traders were relieved to see that the labor market did not improve too much for workers. The Dow Jones gained 154 points.
"It's a good set of figures. The economy retains a lot of forward momentum, but there has been some moderation in overall economic activity," said William Sullivan, analyst with Morgan Stanley Dean Witter.
Average hourly earnings, a key gauge of inflation pressures, rose 0.4 in June to $13.71. Many analysts were expecting a 0.3 percent gain. In May, wages grew by a slim 0.1 percent.
The Federal Reserve has boosted interest rates six times over the last year to slow the economy and keep inflation under control. A number of economic reports, including new home sales and retail sales, have suggested that the Fed's interest rate increases are working to slow economic growth. The rate increases are designed to make borrowing more expensive and cool demand for big-ticket items such as homes and cars. In May, total payrolls rose by 171,000, weaker growth than the government previously estimated. But all that strength came in government hiring of temporary workers to conduct the census. American businesses, however, cut 165,000 jobs that month, more than the government estimated one month ago. The increase in June's private payroll jobs reflected a mixed picture. The service sector, normally the driving force behind job creation in the United States, lost 2,000 jobs, the weakest performance since January 1996 when a blizzard hit the East Coast. Retailers, however, added 49,000 jobs with much of the gain coming from hiring at bars and restaurants. Construction companies added 3,000 jobs and factories created 8,000 new positions, but growth in this industry is slowing down after the hikes in the interest rate. "Our business is down about 10 percent from a year ago," said John Wieland, who spends part of his time trying to build up his construction business. But he is also chairman of the Atlanta Federal Reserve, and he has agreed with the interest rate hikes that hit his own bottom line. "The increase in interest rates is supposed to bring the slowdown. The slowdown has happened so it's working just like it should," he said. Wieland may seem pleased that his policy is costing him money, but other executives might be starting to squirm. Retailers like Wal-Mart are reporting smaller gains this year over last. June manufacturing grew at the slowest rate in 17 months, and Merrill Lynch, the investment house that's chock full of bulls, is reportedly thinking what was unthinkableit may be laying off 2,000 people. All of which sounds bad, but is actually good, if you're on Wall Street. A slower economy means less chance that the Federal Reserve will hike interest rates again. But that could all change in a heartbeat, as investors are known for their rapid mood swings. By the time the Fed meets late next month, there will be fresh jobless and other figures, any one of which could ruin a bull's day.
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