Highlights
The labor sector continued to contract in June with payroll jobs falling more than expected while the unemployment rate rose just marginally. Nonfarm payroll employment in June declined 467,000, following a revised fall of 322,000 in May and a decrease of 519,000 in April. The June contraction in jobs was worse than the market forecast for a 350,000 decrease. May and April revisions were up a net 8,000. Payroll losses were widespread.

By major categories, goods-producing jobs dropped 223,000 in June, led by a 136,000 drop in manufacturing employment with motor vehicles & parts down 27,000. Construction decreased 79,000 while natural resources & mining slipped 8,000. Service-providing payrolls dropped 244,000 in June after falling 107,000 in May. Weakness was especially pronounced in professional business services which plunged 118,000. Notable declines were also seen in trade & transportation, down 51,000, and in government, down 52,000.

On a year-ago basis, payroll jobs were down 4.1 percent in June, compared to down 3.9 percent the month before.

Wage inflation was nonexistent in June as average hourly earnings unchanged after rising 0.2 percent in May. The latest gain was lower than the consensus forecast for a 0.2 percent rise. The average workweek slipped to an extremely weak 33.0 hours from 33.1 hours in May.

From the household survey, the civilian unemployment rate rose to 9.5 percent from 9.4 percent in May and was lower than the consensus forecast for 9.6 percent. But the number of unemployed hit 14.7 million, a record high. The June unemployment rate is the highest since 9.5 percent for August 1983.

The June employment report was only a little worse than expected net, taking into account the smaller-than-expected rise in the unemployment rate. Also, jobless claims released at the same time were not as bad as expected. Overall, the markets have to mull over a steep drop in payroll jobs in June versus an easing in claims at month end. Markets may go back and forth today, trying to decide the net impact of this morning's numbers. But at the release of the numbers, the focus was on the worse-than-expected payroll loss, with equity futures headed down.

Market Consensus Before Announcement
Nonfarm payroll employment in May was unexpectedly and significantly less negative than in recent months, falling only 345,000. The number of job losses has actually shrunk four months in a row since January's 741,000 plunge. But the bad news was that the civilian unemployment rate jumped another five-tenths to 9.4 in May. There is speculation that the spike in unemployment was largely due to college and high school graduates not being able to obtain employment and due to the difficulty in seasonally adjusting jobless numbers this time of year. The May rate was the highest since 9.5 percent last seen in August 1983. Wage inflation remained very soft in May as average hourly earnings posted only a 0.1 percent gain. Looking ahead, job losses are likely to continue in June but the key question is whether the rate of job loss will slow. Although many analysts expect the unemployment rate to continue to rise, we could get a modest technical reversal in June as there is not as much of a surge in college graduates entering the job market.

2009 Release Schedule

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