There were few people in the media still trying to spin the "green shoots of recovery" story following the release of the June employment report yesterday, but most news reports managed to overlook one of the most important items in the data. The downturn has led employees to cut back both jobs and reduce hours for those who still have jobs. In June the economy reportedly lost 467,000 jobs in June. This number was considered a surprising jump from the 322,000 rate of job loss in May (it should not have been a surprise, given that weekly unemployment insurance filings averaged well over 600,000). Nonetheless, the June pace of job loss was still well below the 670,000 per month average from October to April. However, the Labor Department's index of hours worked fell by 0.8 in June, the same as the average for the October to April period. While hours are poorly measured, and this drop could be partially reversed in future months, the June data implied that employers are still cutting back work hours at the same pace as they did in the period of the economy's sharpest decline. It is important to follow trends in both hours and employment. Obviously workers would rather see their hours cut than lose their jobs, but if workers are getting paid for fewer hours each week, then they will be seeing smaller paychecks, and therefore cutting back their consumption. The recent data may indicate that the economy is not declining at the same rate as it did at the start of the year, but there can be little doubt that it is still heading downward at a pace that at other times would be quite scary.
--Dean Baker
