Unemployment Report Disappoints… Again

This morning’s unemployment report for June shouldn’t have come as a big negative surprise since the number of new jobs created was actually marginally higher than last month. Nevertheless, the stock markets immediately took a dive following the report (Dow down almost 200 points as this is written).

The Labor Department’s monthly report came in pretty much as expected, with the official unemployment rate holding steady at 8.2%. Net new jobs created in June were 80,000 as compared to only 77,000 in May.

Last week economists had projected that the new jobs number would come in above 100,000, but as of yesterday the consensus expectation had been trimmed to 95,000. So in that regard, the report was slightly worse than expected at 80,000.

As you can see in the chart, new private sector job creation fell sharply in the 2Q. New jobs created in the three months ended June averaged less than 80,000 per month as compared with 226,000 per month on average in the 1Q.

June’s weak jobs growth added to fears that the recovery is waning. The economy needs around 150,000 jobs added each month just to keep up with population growth. It needs even more to bring the unemployment rate down, especially with President Obama handing out work permits to almost a million illegal aliens.

Among the sectors adding jobs in June, manufacturers hired 14,000 workers, professional and business services added 47,000 jobs, and restaurants and bars added 15,100 jobs. Meanwhile, retailers slashed 5,400 jobs and the government cut 4,000 jobs last month.

Even though this morning’s report showed that manufacturers added jobs in June, that fact was greatly overshadowed by Monday’s ISM manufacturing index which plunged to 49.7 in June, down from 53.5 in May. A reading below 50 in the ISM indicates that the economy is contracting and may be slipping into a new recession.

Thursday’s report on new filings for state unemployment benefits (“initial claims”) for the week ended June 30 fell slightly to 374,000, down from 388,000 the prior week. Even at 374,000 the number is significantly higher than the weekly numbers in most of the 1Q.

Overall, the job market has a long way to go to climb out of the deep hole left by the financial crisis. Of the 8.8 million jobs lost since late 2007, only about 3.8 million have been added back. Roughly 12.7 million Americans remain unemployed, and almost 42% of them have been out of work for six months or longer.

The so-called “under-employment rate” rose to 14.9% in June. That rate includes the unemployed as well as people who could only get part-time positions and who have looked for a job at some point in the past year.

Today’s  jobs report was not good news for the president. There are four more monthly unemployment reports between now and the election.

The LIBOR Scandal

In case you haven’t heard about this yet, a big scandal was uncovered over the last two weeks that has some of the world’s largest banks accused of price-fixing the LIBOR (“London Interbank Offered Rate”) to their advantage. This scandal is getting bigger by the day, but most investors are unaware of it.

I’ve read over a dozen articles on this topic just this week. Perhaps the best one, in terms of explaining in simple terms how this scandal worked – and how it affects you and me – was penned by Dan Caplinger of The Motley Fool yesterday. Here’s a link to the article (minus advertisements) to get you up to speed:

http://garydhalbert.com/misc/libor-scandal.html

We’ll be hearing a lot more about this scandal in the weeks ahead.

Have a great weekend everyone!

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