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Low job growth still plagues labor market
Labor market remains sluggish,
Unemployment rate remains unchanged,
Construction spending rose 0.9% in May largely on the strength of private residential projects,
New orders for goods from U.S. factories increased.
The manufacturing index dropped "indicating contraction in the manufacturing sector ".
Growth of the service sector slowed from May and was below expectations
In SUMMARY: We are muddling along.
Here is the rest of the story, from VANGUARD:
JULY 06, 2012
A sluggish labor market remains the main stumbling block for the U.S. economy, which seems to be in the summer doldrums. While there was some job growth in June, the unemployment rate remained unchanged. In other news, factory orders were up although both the Institute for Supply Management's manufacturing and nonmanufacturing indexes reported disappointing results. On a more positive note, construction spending increased. For the week ended July 6, the S&P 500 Index declined 0.5% to about 1,355 (for a year-to-date total return—including price change plus dividends—of about 8.9%). The yield on the 10-year U.S. Treasury note declined 10 basis points to 1.57% (for a year-to-date decline of 32 basis points).
Unsettled employment picture
The economy added 80,000 jobs in June, and the unemployment rate remained unchanged. Employment growth averaged 75,000 per month in the second quarter, down from a monthly average of 226,000 in the first quarter. Private employment grew by 84,000, while government agencies shed 4,000 jobs. Professional and business services tacked on 47,000 jobs, including 25,000 temporary positions. Manufacturing added 11,000 jobs. The report wasn't totally bleak: The average workweek and average hourly and weekly earnings all increased a bit. Overall, while jobs are being added, the totals aren’t enough to both absorb new entrants to the job market and reemploy the huge numbers that were affected by the recession.
Residential projects propel construction
Construction spending rose 0.9% in May, above expectations, largely on the strength of private residential projects. Compared to a year ago, construction spending is up 7.0%. Total private-sector construction spending advanced 1.6% in May and 13.1% from a year ago. Spending on manufacturing and commercial projects also fueled the growth. The data for public construction spending wasn’t as rosy––a 0.4% decrease in May and a 3.9% drop from a year ago, as struggling state and local governments continued to trim their budgets.
Factory orders climb
New orders for goods from U.S. factories increased by a better-than-expected 0.7% in May, reversing two straight monthly decreases. New orders rose 1.3% for manufactured durable goods, which are meant to last at least three years, and 0.2% for manufactured nondurable goods. Transportation equipment accounted for the largest increase at 2.7%. Shipments were up 0.5%, their fifth rise in six months after a dip in April. Inventories fell 0.2%, the second straight monthly decrease.
Manufacturing index shows contraction
The Institute for Supply Management's manufacturing index, which assesses June's data, differed from May's factory orders report. The index dropped more than forecast in June to 49.7, a decrease of 3.8 percentage points, "indicating contraction in the manufacturing sector for the first time since July 2009," according to the ISM's statement. The new orders index fell 12.3 percentage points and the exports index dropped 6.0 percentage points; manufacturers may be feeling the effects of the troubled global economy. Manufacturers' costs are lessening––the prices index for raw materials decreased 10.5 percentage points. Only seven of the index's 18 manufacturing sectors showed growth in June.
Service sector loses steam
While the service sector grew for the 30th straight month in June, the pace of growth slowed from May and was below expectations. The Institute for Supply Management's nonmanufacturing index fell to 52.1 from May's reading of 53.7, the third decline in four months. Although the report was disappointing, an index reading above 50 still indicates growth. The business activity, new orders, and new export indexes all declined, while the employment index climbed. Also, the prices index fell for the second straight month.
The economic week ahead
The Federal Open Market Committee will release the minutes from its latest monetary policy meeting on Wednesday. Next week also brings reports on consumer credit (Monday), international trade (Wednesday), and producer prices (Friday).