Economy Lost 62,000 Jobs in June (Update)

The sixth straight monthly decline came in-line with the consensus expectation.
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Updated from 9:02 a.m. EDT.

The unemployment rate held steady at 5.5% in June, though employers continued to shed jobs for the sixth straight month, the Labor Department said Thursday.

Nonfarm payrolls decreased by 62,000 last month, adjusted for seasonal fluctuations. The figure was slightly higher than the consensus estimate of 60,000 jobs cut. The economy lost 49,000 jobs in May.

Layoffs have spread throughout the private sector, provoked by the bursting of the housing bubble and high oil prices. The construction sector has been especially hard hit, slashing 528,000 jobs since its peak in September 2006, though layoffs have been widespread across the financial sector, airline industry and manufacturing.

Several major companies -- including

Citigroup

(C) - Get Report

,

Goldman Sachs

(GS) - Get Report

,

American Airlines

(AMR)

,

Delta

(DAL) - Get Report

,

Starbucks

(SBUX) - Get Report

and

Anheuser-Busch

(BUD) - Get Report

-- have recently announced layoffs or are rumored to be cutting jobs to pare costs.

In similar fashion,

AirTran

(AAI)

is reportedly slashing wages by 10%. The Labor Department reported wages rose 0.6 cents per hour, or 0.3%, last month. That compares with recent inflation rates hovering near 4%.

James Glassman, a senior economist at JPMorgan Chase, noted that the job market is losing momentum much faster than the broader economy, which has grown about 2% over the past four quarters. The most significant piece of the jobs report in his view is that unemployment stayed at 5.5%, indicating that "the big run-up we saw in May was not an aberration."

"The silver lining in all this is that the slow economy is forcing everybody to get more efficient and productivity is better, but that's not good news for workers," he added.

Peter Morici, a professor at the University of Maryland and former chief economist at the U.S. International Trade Commission, placed the unemployment rate closer to 7.2%, noting a surge in discouraged workers who have exited the labor force completely. The Labor Department does not factor in those 1.6 million Americans, because they had not actively sought work in the past month.

Morici is bearish on the jobs outlook, noting that highly-skilled workers will continue to find jobs in areas like finance, health care, education and engineering, while those with just a high-school degree will be hard-pressed to find adequate pay and benefits.

"For those workers, who compose about half the working population, the quality of jobs continues to spiral downward," he said in a note Thursday.

Government initiatives to ease the economic crunch -- from lower interest rates to stimulus checks -- have had positive effects, but are certainly not a panacea. Consumers getting squeezed by high costs, declining home values, minimal wage growth and a contracting job market are likely to find a tough slog ahead.

"The real story is that rebate-related income is temporarily plugging a hole in consumer finances," said Zach Pandl, a Lehman Brothers economist. "Basically, the data we're getting is showing a picture of consistent weakness in the job market."

Since payroll employment peaked in December, employers have slashed a total of 438,000 jobs, with particular weakness in construction as the housing bubble burst. The construction sector cut 43,000 more jobs in June. Since its peak in September 2006, that sector has lost 528,000 positions.

Manufacturing also posted a sharp decline of 33,000 jobs last month, though the booming U.S. export business has helped keep that sector from collapsing. Retailers cut 7,500 and financial services lost 10,100.

While there were some bright spots in the report -- the health-care and oil-exploration sectors remained strong -- it is far from a rosy picture for someone trolling job listings. As Glassman noted, "there are fewer people in the oil-exploration business than ... we have at JPMorgan."