The US unemployment rate held steady at 8.2% despite today's less than stellar jobs report; the broader underutilization rate again increased - this time to 14.9% (from 14.8%).
• A net +80k jobs were created in June, well below consensus estimates of +100k and the +176k figure reported by ADP; an average of +226k jobs were created in the first three months of 2012; in contrast, only +75k jobs were created during this last quarter.
• The total number of unemployed (12.7M) held steady while the long-term unemployed - those out of work for 6+ months decreased significantly (to 41.9% from 42.8%).
• A net +80k jobs were created in June, well below consensus estimates of +100k and the +176k figure reported by ADP; an average of +226k jobs were created in the first three months of 2012; in contrast, only +75k jobs were created during this last quarter.
• The total number of unemployed (12.7M) held steady while the long-term unemployed - those out of work for 6+ months decreased significantly (to 41.9% from 42.8%).
• Brighter days ahead? Companies announced fewer layoffs in June (37.5k), the lowest figure in 13 months, according to a report by Challenger, Gray & Christmas. Moreover, approximately 374k people filed for first time unemployment benefits, a six week low and more evidence that the pace of layoffs is subsiding.
Not much to write home about...
• Significant growth in specialty skill sectors, moderate growth everywhere else: professional and business services (+47k; +25k in temp help), health care and leisure and hospitality(both +13k), manufacturing (+11k) and construction (+2k; +10k for specialty trade contractors) experienced gains.
• Significant growth in specialty skill sectors, moderate growth everywhere else: professional and business services (+47k; +25k in temp help), health care and leisure and hospitality(both +13k), manufacturing (+11k) and construction (+2k; +10k for specialty trade contractors) experienced gains.
• Retail (-5.4k; +1.0k for clothing stores), government (-4k), transportation and warehousing (-2.2k) experienced modest declines.
• Noteworthy…year-over-year declines in unemployment rate by industry: construction (-2.8%), manufacturing (-2.3%), wholesale and retail trade (-1.4%), leisure and hospitality (-1.1%), government (-0.6%) and professional and business services (-0.2%); notable exception: education and health services (+0.4%).
What’s in store? Key watch items…
On the bearish side:
• Europe. Despite yesterday's monetary policy interventions by the European Central Bank (ECB) and the Bank of England (BOE), it is hard to see an end to the financial crises that has plunged the EU into recession. While an agreement in principle for closer integration of Euro Zone banks provides a (very) small glimmer of hope, EU leaders will continue to struggle with the political balancing act of country vs. currency bloc interests which has so far stifled meaningful progress. The EU's struggles are hitting home, depressing US corporate profits from Europe by $48.1B in the first three months of 2012 and driving weaker export growth: only a 4.2% increase (vs. a previous estimate of 7.2%).
• Consumer spending. The Commerce Department revised Q1 12 consumer spending for a second time from 2.7% to 2.5% (vs. an initial estimate of 2.9%), suggesting that the US' consumer-driven recovery was never as robust as originally thought. Consumer spending, which accounts for nearly 70% of GDP, isn't likely to recover until the job market does. With so many unemployed, there is little upward pressure on wages. Subsequently, hourly earnings is lower now than it was when the recession ended in June 2009 (when adjusted for inflation). In fact, household spending decreased in May - the first drop in nearly a year.
On the bullish side:• Housing. Based on the May housing report, pending homes sales rose 5.9% from April and stood 13.3% above year-ago levels. The May report hasn't seen these levels since 2006 when the housing bubble peaked. Based on the data, it appears that the housing market has finally turned the corner and the US economy can begin ridding itself of a key growth barrier.
• Additional central bank intervention (kind of a stretch but we'll take what we can get at this point). Given the spate of dour economic data, central banks of the world have signaled their intent for additional monetary policy interventions to spur growth (e.g., US and BOE quantitative easing, ECB and China interest rate cuts, lower Chinese deposit rates, etc.), a position confirmed by Fed Chairman Bernanke this week. While the jury is still out on the effects of central banks' efforts, recent studies suggest that the Fed and BOE efforts have made conditions easier for businesses to finance future growth. With inflation subdued, we should expect to see continued intervention(s).
