The U.S. economy continued its aggravatingly slow recovery from the Great Recession in June, according to the Bureau of Labor Statistics’ monthly jobs report. The economy added 223,000 new jobs, by preliminary estimates, but previous estimates for April and May were revised downward by a combined 60,000 as the economy continued to bleed workers.
The unemployment rate dropped to 5.3 percent, but the decline was due to 432,000 people leaving the labor force – meaning that they do not have jobs, and are not looking for jobs, either because of retirement or because they do not believe they will be able to find one.
“[T]he prime-age employment-to-population ratio continued to be stuck in the doldrums at 77.2 percent,” wrote economist Elise Gould of the Economic Policy Institute. “Given the continued slack in the labor market, it is not surprising that nominal average hourly earnings only rose by an unimpressive 2.0 percent over the year: unfortunately, it is clear that the economy is continuing to leave workers high and dry.”
The overall decline in workforce participation is worse than the aging of the Baby Boom generation would have predicted, wrote economist Harry Holzer, a professor at Georgetown university and a fellow at the Brookings Institution.
“The monthly labor force participation rate dropped to 62.6 percent, the lowest rate observed in many years,” said Holzer. “We always knew that participation would decline as the Baby Boomers retired, but labor force activity has also declined among those below the age of 55, and so far those numbers have recovered fairly little.”
In addition, after a reported rise in worker pay last month, wages were flat in June at an average $24.95 per hour.
“The hefty increase observed last month now looks more like a statistical fluke,” Holzer said. “Wage gains over the past year have averaged just 2 percent, only a bit higher than the rate of inflation.”
The signs of potential weakness in the labor market led some, like Gould, to urge caution when the Federal Reserve’s Federal Open Market Committee begins considering whether to raise interest rates above the current near-zero level.
“In light of this jobs report, it is more than obvious that the Federal Reserve needs to stay the course–if they act too soon, they will take the remaining wind out of the economy’s sails,” Gould wrote.
However, there were some voices of optimism. Calling it a “solid report,” Stu Hoffman, chief economist for PNC Financial Services Group, said, “We expect real GDP growth to rebound to at least 3.0 percent per annum in the middle two quarters of this year on strength in consumer spending, residential and nonresidential (including public) construction and less drag from private energy investment and net exports.”
Hoffman said that he still expects the FOMC to begin raising interest rates when they meet in September.
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