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July 2 - Labor markets continue to deteriorate in
June. According to the Bureau of Labor Statistics, the unemployment rate
edged up to 9.5% from 9.4% in May.  Monthly employment declined by
467,000, worse than in May but better than earlier in the year.  A decline
in weekly hours suggests that hiring will not pick up soon.

Job losses
were widespread but particularly evident for the auto and related
industries.  Health care employment was one of the few major categories
that increased.  

The data released today suggested that labor
market deterioration has slowed from earlier in the year, but raised questions
about the pace of improvement to be expected in the coming months. The reports
contained positive and negative elements, and so it is difficult to draw
conclusions.  The financial markets focused
on the "bad" news (June employment losses were larger than expected
and worse than May's), and overlooked the fact that recent deterioration, while
disappointing, is an improvement over earlier in the year.  Additional
"good" news released today by the Labor Department showed a gradually
improving trend in weekly
unemployment claims (smaller claims on a four week moving average basis),
but it was also ignored by the financial markets.   

Policymakers are no doubt increasingly nervous on
the basis of today's report. The unemployment rate is approaching the
politically sensitive rate of 10%, which most experts expect to see this year -
perhaps sooner rather than later.   Until the job market improves, it
will be difficult for the administration to point to success from its stimulus
package.  From the perspective of many
economists, however, a lag is understandable and even to be expected based on
recent experience.  In the previous two recessions, the U.S. has
experienced "jobless recoveries" in the early phase of increased
economic activity as firms rebuilt their balance sheets before taking on new
hiring expenses.