After trending steadily higher since the equity bull market began, hours worked by employees fell in June, a signal employers are not only hiring less, but starting to ask current employees to work less because of weak demand.
Average weekly hours fell to 34.3 from a 34.4 reading in both May and April, according to Friday’s jobs report from the Department of Labor. The 34.4 hours worked is the highest since September 2008 and up from a low of 33.7 in June 2009. The S&P 500’s 70 percent-plus run began in March of that year.
“What adds to my angst about this report is that current employees, despite job losses, are not being asked to work more hours,” said Stephen Weiss of Short Hills Capital. “In fact, average hourly earnings and average work week were down.”
The report, which showed a disappointing addition of just 18,000 payrolls in June, indicated that average hourly earnings fell by a penny to $22.99. On an annual basis, hourly earnings are up just 1.9 percent, less than the rate of inflation.
“Average workweeks, partly due to technology advances, also continue to be tightly managed,” said Brian Sozzi, equity research analyst with Wall Street Strategies, in a note following the report. “So against a backdrop of gasoline prices being higher than one year ago and persistently elevated food expenditures, U.S. workers are not earning more through base hourly pay and overtime. Furthermore, one could say that the quality of jobs created has caused returning workers to earn less than their previous place of employment, despite in some cases strong skillsets.”
In another sign of retrenchment, some sectors showed outright job losses. Companies in the construction, finance, education and health industries fired more workers or kept their workforces the same in June.
Still, many economists chalked this wretched jobs report up to seasonal factors and did not feel like executives asking employees to knock off early and losses in many key industries were a hint at a double-dip recession.
“There is certainly no way to view the June report as anything but weak, and the fact that it follows on the heels of an equally soft May report is certainly disconcerting,” said RBS economist Omair Sharif, in a note. “That being said, we know that a number of temporary factors that held back the economy are likely to reverse in Q3 and will help to boost growth. Currently, it seems that business sentiment is resting on a knife’s edge, with a few weak (strong) reports enough to push sentiment, and business decisions on hiring, into negative (positive) territory.”
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