There’s been an increasing sense that the economy has slowed further in the second quarter. Today’s employment report did nothing to allay that concern.
Although economists had expected the pace of nonfarm payroll growth to falter during the month, today’s result was much weaker than anticipated. At a mere 54,000 jobs being added to nonfarm payrolls during the month, it was also much, much weaker than the encouraging results of the prior three months. The Bureau also revised the estimated increases in non-farm payrolls for the preceding two months lower by a combined 39,000.
We’ve been suggesting for some time that the jobless rate was at risk of reversing its gradual cyclical downward trend, as previously discouraged workers re-enter the workforce. The marked slowdown in the pace of job creation, however, wasn’t as apparent even a few months ago given the broad expectation that economic growth for 2011 would accelerate. That expectation is now in doubt.
All of this weighs heavily on jobseekers, and that pessimism also has a real effect on household consumption and investor risk appetite.
In the past few weeks, references to a double-dip recession have reemerged. We believe that drawing that conclusion is still premature, but a further slowdown in growth in an already slow growth environment clearly creates some additional risk.