Shannon Stapleton / REUTERS
People wait in line to enter a job fair in New York.
By Roland Jones
Friday?s disappointing June jobs report confirms observers? worst fears about the economic recovery: The employment market is still struggling and failing to put enough Americans back to work.
The dour employment data are also likely to raise pressure on the Federal Reserve to do more to bolster the economy, and have negative implications for President Barack Obama's chances of re-election in November.
The Labor Department said non-farm payrolls expanded by just 80,000 jobs in June, falling just short of forecasts for 90,000 jobs, but improving slightly on a revised reading of 77,000 jobs in May. The private sector expanded by only?84,000, while government jobs declined by 4,000.
Job creation during the month wasn?t robust enough to reduce the country?s unemployment rate, which held fast at 8.2 percent, extending its three-plus-year run above 8 percent.
?It?s not great,? Mark Zandi, chief economist for Moody?s Analytics, told CNBC, referring to the payrolls number. ?But the recovery is intact and moving forward, and hopefully [the economy will] gain some strength later in the year.?
The June number marks the third month in a row of weak hiring and is a fraction of the robust job growth seen earlier this year.
In January and February nonfarm payrolls grew by 275,000 and 259,000 jobs respectively, but the pace of job creation slowed suddenly in April and May, raising the question of whether the winter job gains were temporary and due to unseasonably warm weather rather than a recovering economy.
June?s 80,000-jobs number is well below the levels seen at the start of the year, and a monthly gain of between 125,000 and 150,000 jobs is needed just to keep up with the growth in the number of new people entering the workforce each month before even starting to whittle down the backlog of nearly 12.7 million unemployed Americans.
A pace of job creation that?s not strong enough to keep up with population growth is likely to raise pressure on President Obama, endangering his chances of reelection in November.
Speaking at a campaign rally in Ohio Friday, Obama said that June?s private-sector job growth of 84,000 was a ?step in the right direction,? but not enough to be satisfied with the pace of hiring. Earlier, Republican presidential rival Mitt Romney denounced Obama?s economic policies, calling the jobless rate unacceptably high.
?American families are struggling,? Romney said at a press event held in New Hampshire. ?The president?s policies have not gotten America working again, and the president is going to have to stand up and take responsibility for it.?
Related: The other measure of joblessness hit 14.9 percent in June
Coupled with recent data that show a sharp decline in manufacturing, the dour payrolls report paints a gloomy picture of the U.S. economy that analysts say is likely to raise expectations that the Federal Reserve will initiate another massive bond-buying program known as ?quantitative easing,? or QE, in which the Fed essentially?prints?money to buy long-term mortgage or Treasury bonds. The Fed next meets to decide on monetary policy July 31-Aug. 1.
?There?s no question that the QE3 conversation becomes very alive in the coming days and weeks,? said Jeff Savage, regional chief investment officer for Wells Fargo Private Bank in Portland, Ore.
?Frankly, if you are an American employer, with the uncertainty that you have in front of you for the next six months, there is just no reason to go out and do a lot of hiring right now,? he added.
A move by the Fed to inject more stimulus into the economy would be controversial, given that the central bank has few tools left to combat a lethargic economy with short-term interest rates already close to zero.
It also presents a challenge for Fed policymakers, who are likely to want to keep something in reserve in case the?economic outlook worsens?over the summer.
There are other potential stumbling blocks, including the so-called ?fiscal cliff? -- tax increases and government spending cuts that are supposed to start in 2013 and could push America into recession if they are not addressed, according to recent congressional testimony from Fed Chairman Ben Bernanke.
Jan Hatzius, chief economist at Goldman Sachs, told CNBC he thinks the Fed will take further steps to boost the economy, but is likely to hold off until later in the year when its current stimulus program, known as ?Operation Twist,? concludes. In it the Fed sells short-term bonds and uses the funds to buy longer-term securities in an effort to lower long-term interest rates and stimulate borrowing and investment.
Hatzius said he doesn?t think the latest jobs report is a recessionary signal, but it ?reinforced the slowness? seen in other areas of the economy.
?Clearly this shows the economy is growing at a below trends pace, and it?s not enough to bring people back into the workforce,? he said, adding that if we were to see more deterioration in the manufacturing sector, or other business-related economic surveys, it would be ?another warning sign.?
A report earlier this week showed U.S. manufacturing slowed sharply in June to a level that suggests the sector is contracting after nearly three years of growth. The data are a worrying sign for the economy, as manufacturing has been a rare bright spot in the economic recovery.
Another worry for the U.S. outlook is Europe, America's largest trading partner, where some countries are sliding into recession as the region?s debt crisis continues.
Brian Wesbury, chief economist at First Trust Advisors, said the economy is mired in a state of sluggish growth.
?We call this the plow horse economy,? he told CNBC. ?It?s not going to win the Belmont, but it?s not going to keel over and die either.?
Wesbury compared the current slowdown to the downturns in 2010 and 2011.
?It?s temporary, and I think we will accelerate in the second half of the year,? he said.
Hatzius said he saw two positives in the jobs report. One is that housing is going through a ?healing process,? and another is the recent drop in energy prices, which ?should help households spend a little more.? It?s also important to note that the recovery from the housing market?s collapse is likely to take a long time, he said.
?The hangover after the burst of housing bubble tends to be protracted; that?s why we have seen a tepid recovery over the past few years,? Hatzius said.
Reuters contributed to this report.
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Jan Hatzius, chief economist at Goldman Sachs, on the June jobs report.
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Public release date: 6-Jul-2012
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