The US Labor Department yesterday reported the labor market had performed considerably worse in June than had been expected. Nonfarm payrolls (jobs) fell by 467,000, following a loss of 322,000 in May, whereas the unemployment rate edged higher to 9.5% from 9.4% in May.
The disappointing jobs report highlighted the severity of the downturn and suggested a bottom for employment is not near. As hopes of an economic recovery during the second half of the year dimmed, the stock market indices declined sharply for a third consecutive weekly loss.
Putting the job losses in historical perspective, Chart of the Day produced a graph comparing job losses during the current economic recession (solid red line) to those of the last recession (dotted gold line) and the average recession from 1954-2006 (dotted blue line). Strikingly, the chart illustrates that the current job market has suffered losses that are nearly three times as much as the average. As shown, if this were an average recession/job loss cycle, the number of jobs would have started increasing three months ago.
In a related video clip, Bill Gross, co-chief investment officer of Pimco, shares his reaction to the jobs report and the consequences for the US economy.
The slide in employment is representative of what the US economy faces for years to come, Gross told CNBC. A slow-growth scenario continues to play out as consumers who are losing their jobs or are in fear of facing unemployment cut spending and inhibit economic growth, said Gross.
Much like we saw with the Depression, attitudes change, and so consumers and investors will now become conservative savers as opposed to spenders. Spending as driven by asset appreciation in terms of houses ... that game stops, that game has stopped and we must now move in another direction.