June Unemployment: A Spectre Of A New Recession

The ghost of recessions past returned as the US moved into the same funk that it experience in 1982 and 1983 when joblessness was above 9.5% for nearly a year and a half.

Total job growth dropped in June for the first time in 2010 as nearly 250,000 temporary census workers lost jobs, the Labor Department reported. Private sector payrolls expanded by a only 83,000 in June.  Economists expected the figure to be closer to 150,000.  The unemployment rate dropped to 9.5% in June from 9.7% in May. There was a breathtaking 652,000 decline in the labor force in June.Non-farm payrolls fell 125,000 Experts expected the unemployment rate to stay at 9.5%The news adds to a string of remarkably bad news which has been released by both the public and private sector in the last 30 days and is an indication the expansion, which look so hopeful in March, April, and May has either faltered or reversed itself

ADP and Challenger Christian jobs data were both disappoints. Anticipated sales of new homes dropped 30% in May despite record low mortgage interest rates. And The Conference Board indicator of consumer confidence fell sharply

The Administration is now left with the stark problem that its $787 billion aid package has not stimulated the economy or added the 3 million jobs that it has promised. The political environment is such that putting a new stimulus package through Congress, even a very modest one, is impossible. The House and Senate have even been skittish about extending unemployment benefits for almost 1.3 million of the unemployed because the CBO says the cost of the decision would be $33 billion.

Obama finds himself in the middle of the debate about how to best solve the stagnation of the US economy. He can take the Angela Merkel route of pushing austerity which puts long term deficit reduction ahead of rapid growth, or the French approach which is that stimulus money is still needed to keep a recession from washing over Europe.

Experts and both the IMF and World Bank said that they are in favor of governments adding to their stimulus packages. But, Obama cannot get Americans to accept that math.