This morning's jobs report represents a painful blow right to the belly of the sluggish national economic recovery:
U.S. employment growth ground to a halt in June, with employers hiring the fewest number of workers in nine months, dampening hopes the economy was on the cusp of regaining momentum after stumbling in recent months.
Nonfarm payrolls rose only 18,000, the weakest reading since September, the Labor Department said on Friday, well below economists' expectations for a 90,000 rise.
The difference between those expectations and the actuals, about 72,000 jobs, is not a massive number in absolute terms, but the fact that job creation has declined rather than risen -- indeed, the most recent hopes were that the rise would be substantial -- dashes any hopes that the past few months' declines in job growth were an aberration, and imply that a "double-dip" recession is still a real possibility.
Worst of all, with the President and Congress aggressively pursuing huge federal budget cuts, this latest data suggest that such a deal could smash the mini-recovery right over the head, and send unemployment soaring back about 10% this year.
Please turn to Page 2
The jobs report indicates that employment in the private sector increased by 57,000 during June, still a small number. But this was offset by job reductions of 39,000 in public sector employment, due to the fiscal crises besetting most state and local governments. If the private sector is only able to generate such a paltry level of new employment under current conditions, the ONLY significant source of additional jobs (and of retaining current employment levels) is going to continue to be through public sector stimulus.
The Republican orthodoxy, which says that the budget deficit causes economic decline, is a fantasy built upon pathological hatred of government itself. Any notion that deep cuts in the federal budget in the near-term will stimulate growth and private sector hiring is a purely faith-based, fact-challenged delusion. On the contrary, the only thing that reducing public spending will guarantee over the next several months is that even more people will lose their jobs. That's what budget-cutting means in the public sector: fewer people on the payrolls (as well as less money flowing to, yes, private sector companies that do business with the federal government).
So if the parties continue to forge ahead recklessly with the massive budget cuts that are currently under negotiation, we can expect to see even more horrific jobs reports in the months ahead.
Just do some back-of-the-envelope math: if they cut $2-trillion over 10 years, that's $200-billion per year, presumably beginning with this year's/next year's fiscal budget. Assume an average loaded public employee cost of $100,000 per year (to be generous). That represents approximately 2-million equivalent jobs! Naturally, not all of the cuts would flow through to actual job losses or reduced hiring, for a lot reasons. But if even just 10% of the cuts come in the form of direct payroll reductions, that's another 200,000 unemployed who will have to be absorbed elsewhere into the economy. Given the anemic state of the recovery, there's little chance of this happening any time soon.