The most recent employment report from the Bureau of Labor Statistics (BLS) shows that the strong job growth from earlier this year is long gone. Recent months have seen the job market settle into a pattern of persistently weak gains.
Continue Reading Below
This slow job growth isn't just bad news for people who are out of work. There are ways this trend hurts the employed as well -- in particular their finances.
The employment situation
The BLS reported 80,000 new jobs for the month of June. The unemployment rate remained at 8.2 percent, because with new people entering the job market all the time, job growth has to be stronger to make a dent in the unemployment rate.
Month-to-month, employment numbers can be erratic, but June's job growth seems to fit into a lengthening trend of sluggish progress. Prior to June's 80,000 new jobs, the figures were 68,000 for April and 77,000 for May.
June's job growth seems even weaker when you consider that temporary help agencies accounted for 25,000 of those jobs. Meanwhile, the manufacturing sector has seen a big step back in job growth. Manufacturing employment grew by an average of 41,000 a month in the first quarter of this year, compared to just 10,000 a month in the second quarter.
Continue Reading Below
Because slow employment growth indicates that fewer people are going back to work and businesses are reluctant to invest, it means less new money will be pumped into the economy going forward.
Low employment growth is a direct hardship for people in search of a job, but it also casts a much wider circle of negative implications. Here are two prominent ways that a weak job market can hurt even the employed:
- Low bank rates will be here for a while. Savings account, money market and CD rates are all at extremely low levels already, and while there isn't much farther for them to fall, the weak economy indicated by the poor jobs report means those low rates are going to stick around for a while. An uncertain lending environment gives banks little incentive to attract new deposits, because they don't have a profitable way of putting that money to use. The same goes for the shaky investment environment. Meanwhile, the Federal Reserve has responded to continued economic weakness by renewing its commitment to driving interest rates down to unnaturally low levels.
- Wage growth will be anemic. Even if you already have a job, a weak job market can hit you in the paycheck by watering down the pay raises you earn. When there is little competition for labor, employers don't need to offer strong raises. Both employers and employees are aware that there is probably someone out there who would do a given job for less. According to the BLS, average wage growth over the past year was just 2.0 percent, which is barely enough to keep pace with inflation.
One other impact from the weak employment trend that you can count on, for better or worse: Jobs will remain front and center as an issue in this year's presidential campaign.
The original article can be found at Money-Rates.com:
How lackluster job growth affects your finances