'Horrific' Jobs Report Renews Fears of Double-Dip Recession
Published: Friday, 8 Jul 2011 | 10:42 AM ET
June's miserable jobs report has put the fear of a double dip recession back into the markets.
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The U.S. economy added a paltry 18,000 jobs in June, and the unemployment rate climbed to 9.2 percent from 9.1 percent as laid off government workers continued to join the ranks of the unemployed. There were also 44,000 fewer jobs created than previously reported for April and May.
"Even the hours worked slipped. It's just a horrific report. Unemployment going up is not good," said Marc Chandler, Brown Brothers Harriman chief currency strategist.
Stocks were battered, and bond yields slumped as investors rushed to the security of bonds. Investors also sold oil futures, which were rising before the report, and drove up the price of precious metals.
The dollar was higher but off its highs against the euro, as the single currency reacted to assurances from Italy's central bank governor Mario Draghi that Italian banks have enough capital and will pass the stress test.
"In addition to the shock value...we need to seriously question whether a double dip is there. I would say it's back on the table," said David Ader, chief Treasury strategist at CRT Capital.
Many Wall Street economists, and the Federal Reserve, have declared the slowdown in GDP growth in the first half of the year a transitory phenomena, and the weak jobs report now raised the question of whether that soft patch was softer than previously expected. The sluggishness has been blamed on a combination of things, including Japan's supply chain disruptions, high energy costs and a variety of weather disasters across the U.S.
The expectation for the June report was that 125,000 jobs would be added, which included the loss of some 20,000 government workers. Some economists had seen June as the turning point, from which job growth would increase on a monthly basis before returning to the 200,000 level later in the year.
But the report showed that the private sector added 57,000 workers, down from 73,000 in May. Government employment was cut by 39,000 workers, as state and local governments struggle with budget deficits. Revisions showed that only 25,000 jobs were added in May and 217,000 were created in April.
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