WASHINGTON — Unemployment took a gut-wrenching turn for the worse last month, dashing widespread expectations of improvement, fueling fears that the recovery may be stalling, and challenging political leaders who have largely rejected the idea of new stimulus for the troubled economy.
U.S. employers added almost no new jobs in June, the government reported Friday. That pushed the nation’s jobless rate higher for the third straight month — to 9.2 percent — and left the number of idled workers at about 14 million, almost half of them jobless for six months or more.
The near-paralysis in hiring extended across virtually the whole economy, including both public and private sectors. Manufacturing, which many analysts had counted on to help improve the picture, was essentially flat. State, local and federal governments shed thousands of jobs, largely in response to lost tax revenues and budget pressures.
“It’s an abysmally weak report. All of the distress indicators are flashing red,” said Patrick O’Keefe, economic research director at the accounting and advisory firm J.H. Cohn and former deputy assistant secretary at the U.S. Labor Department.
Major stock indexes fell sharply on the news, though they recovered much of the lost ground at day’s end. And economists began ratcheting down projections for the second half of the year, when many had been expecting a relatively healthy uptick in growth.
The lack of hiring in June was all the more dismaying because it flew in the face of most economists’ predictions. In recent days, many had raised their job-growth forecasts into the 100,000 range; though job creation in May had also been disappointing, that was widely attributed to temporary factors, including a spike in oil prices and manufacturing disruptions stemming from the earthquake and tsunami in Japan.
May was not a blip, however. In fact, the 54,000 new jobs originally reported for that month were revised down to just 25,000 on Friday. And that was followed by a barely perceptible 18,000 new net jobs in June.
By contrast, between February to April, employers added an average of 215,000 jobs per month. That was a solid, if less than spectacular, improvement from previous months, and had raised hopes that the long-awaited rebound in the job market was taking hold.
The setback on employment comes at a time when President Barack Obama and congressional Republicans are locked in a struggle over the federal deficit and intent on cutting federal spending, which in the short term at least would likely bleed steam out of the economy and further darken hiring prospects.
Austan Goolsbee, Obama’s chief economist, said the virtual halt in hiring over the last two months reflect the sharp slowdown in economic growth in the first half of the year.
He and most other economists expect both economic and job growth to pick up in the second half, but the latest report cast more doubts about the underlying strength of the economy and whether models for predicting job growth that were developed in past decades are reliable guides in the new economy.
The pressure on policy-makers was intensified by the fact that high levels of unemployment not only inflict pain on the jobless but also impose heavier burdens on working Americans.
While attention is usually focused on the problems of the unemployed and the accompanying rise in the cost of government safety-net programs, the continuing high level of joblessness also means that working Americans must shoulder the full burden of pulling the economy forward.
In effect, instead of helping pull the wagon — by paying taxes and spending wages to help boost consumption — the unemployed are on the sidelines. Government reports show that workers who lost jobs between 2007 and 2009 had median weekly earnings of $602.
“They’re not generating goods and services and the incomes which would cause the economy to expand and make all of us better off,” O’Keefe said, estimating that the lost output and income from the millions of unemployed amount to trillions of dollars. “For the rest of us, it means we’ll work harder and longer, and be less demanding of income and benefits.”
David Neumark, a labor expert at the University of California-Irvine, added another concern for the currently employed: Given the constant flow of people moving in and out of employment, he said, “the higher the unemployment rate, the higher the probability that an employed person becomes unemployed.”