The nation’s employers eliminated tens of thousands of jobs in June for the sixth consecutive month in a steady chipping away of the work force that seems likely to leave the economy very weak through Election Day.
Responding quickly to the government employment report, issued Thursday, the presidential candidates called for action, beyond the recent stimulus package, to reverse the deterioration. In past downturns, the Federal Reserve saved the day, or tried to, by cutting interest rates. This time, however, with the Fed having already cut rates drastically, appeals are increasingly going to the White House and Congress.
“The numbers are telling us that there is an ongoing deterioration in the labor market at a relatively rapid clip,” said Jan Hatzius, chief domestic economist at Goldman Sachs. “It is a sign that the fiscal stimulus, the tax rebates, are failing to lift the broader economy.”
Apart from the 62,000 jobs eliminated in June — and 438,000 since January — most workers lost ground to inflation last month, the Bureau of Labor Statistics reported. While the average weekly wage of most ordinary workers was up 2.8 percent in the 12 months through June, the Consumer Price Index was up more than 4 percent.
“Workers just don’t have the bargaining power to fend off this erosion,” said Jared Bernstein, senior economist at the Economic Policy Institute.
The erosion of purchasing power, in turn, helps to explain the dismally low consumer confidence numbers in recent weeks. The housing market continues to sag, with little hope of improvement soon.
Adding to the gloom, stock prices plunged this week, pushing a crucial market gauge officially into bear territory, or 20 percent off its peak. And the unemployment rate, which had jumped half a percentage point in May, stayed at 5.5 percent in June, dashing hopes that a horde of young people hunting for jobs would find them and unemployment would fall back.
Few teenagers and new college graduates found work, the bureau reported. What’s more, the percentage of unemployed adult workers, 25 and over, ticked up for the second straight month, and various forecasters said that by Election Day, the unemployment rate would probably be 6 percent or more — a level last seen in the early 1990s, in the aftermath of a recession.
During the last 50 years, each time the economy has lost jobs for six straight months, a recession was ultimately declared.
The last two recessions, in 1990-1 and in 2001, started in the very month that employment began to shrink. That might turn out to be the case this time, too, once all the data is finally revised. But with jobs disappearing, the economy managed to expand in the first quarter by a weak 1 percent and probably dodged a contraction in the second quarter as well, in the view of Nigel Gault, chief domestic economist at Global Insight, a forecasting and consulting firm.
“We have not really had a downturn quite like this one in which we lose jobs month after month but the economy somehow manages to grow,” Mr. Gault said.
He and Ian Shepherdson, chief domestic economist for High Frequency Economics, see a recession starting in the fall, just in time for the election. By then, the monthly job losses are likely to have accelerated.
As consumers lose buying power because of weakened wages and high gasoline prices, companies will respond, Mr. Shepherdson said, with bigger layoffs, like those announced this week by Starbucks and American Airlines.
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