US Unemployment: 9.2 Percent and Rising?

Hopes of a speedy recovery for the US economy where dashed by Friday’s disappointing jobs number that showed only 18,000 jobs where created by the world’s largest economy in June.

“The report was a timely reminder that the world’s biggest economy is still fragile, and that its health seems inconsistent with the current level of the prices of many risky assets,” Julian Jessop, the chief European economist at Capital Economics, wrote in a research note following the data.

Noting that total US employment remains seven million below its 2008 peak of 138 million, Jessop warned that commodity markets could be volatile as there are plenty of signs that the US and many other economies are struggling.

Others are concerned that Friday’s data was weak across the board with very few mitigating factors but see better times ahead.

"While the weak labor market reports suggest increasing downside risk on our forecast it is also important to stress that US data remains mixed," Flemming J.

Nielsen, a senior analyst at Danske Bank in Copenhagen, wrote in a note to clients.

"While auto sales remain weak there are signs of improving retail sales in June on the back of lower gasoline prices and we still expect growth to improve in H2 on the back of stronger private consumption,” Nielsen added.

“With mixed data today’s weak labor market report will not be enough to change the Fed’s view that the current weakness is a temporary soft patch.

In addition the bar for further QE is now much higher for the Fed, not least because core inflation could possibly increase into the 1.5-2 percent range in the coming months.” Investors where caught off guard by the jobs data in part due to a very strong ADP report on private employment on Thursday.

“Government employment continues to be a substantial drag on employment growth, with total government employment declining 38,000 in June,” said Nielsen.

“There are signs of weakness across the board with growth in private service payrolls easing further and construction payrolls again contracting.

Manufacturing payrolls improved slightly compared with May, but remains significantly weaker compared with earlier in 2011,” he added.

Others are refusing to take Friday’s disappointment at face value.

“We are not disputing for a second that the economy has slowed significantly over the past few months, and that this has directly affected the labor market.

To argue otherwise would be ridiculous,” said Ian Shepherdson, the chief US economist at High Frequency Economics in a research report on Monday.

Saying that the data - which was so disappointing - are suspicious, Shepherdson is predicting a quick turnaround.

“We cannot prove anything, but we think that if the raw data and the seasonal adjustments were in the dock on trial for misrepresentation we could at least make their palms sweaty," he said.

“If we’re right, it would be reasonable to expect some payback in the July report, or an upward revision to June or both,” Shepherdson added.