By PAUL WISEMAN
AP Economics Writer
WASHINGTON — The job market is defying history.
A dismal June employment report shows that employers are adding nowhere near as many jobs as they normally do this long after a recession has ended.
Unemployment has climbed for three straight months and is now at 9.2 percent. There’s no precedent, in data going back to 1948, for such a high rate two years into what economists say is a recovery.
The economy added just 18,000 jobs in June. That’s a fraction of the 90,000 economists had expected and a sliver of the 300,000 jobs needed each month to shrink unemployment rapidly.
The excruciatingly slow growth is confounding economists, spooking consumers and dismaying job seekers. Friday’s report forced analysts to re-examine their assumption that the economy would strengthen in the second half of 2011.
They had expected improvement in June after a bleak jobs report for May. They figured that hiring in May had been artificially weakened by temporary factors — a run-up in gasoline prices to $4 a gallon and factory disruptions caused by Japan’s earthquake and nuclear crisis.
But the June numbers were even worse than May’s, even though gasoline prices are falling and factories revving up again.
“This is a remarkable, across-the-board backslide,” says economist Heidi Shierholz of the Economic Policy Institute.
Sometimes disappointing economic reports look better on closer inspection. This one gets uglier.
Workers’ hourly pay fell in June. They worked fewer hours. And 16.2 percent of those who wanted to work were either unemployed, forced to settle for part-time jobs or had given up looking for work. That figure was up from 15.8 percent in May.
Among the frustrated is Cris Cohen, who was laid off in April from a job as a contractor for Cisco Systems in Raleigh, N.C. He’s been searching for work since then, futilely combing job listings, reaching out to friends and setting up a website with a resume and a blog.
“In the past when I’ve left jobs or been laid off, I’ve just contacted connections I have had, and that’s led to opportunities,” says Cohen, who has a wife and a 9-year-old son. “Now it’s just seems much more dry.... There’s just always that anxious feeling, that nausea.”
One problem is that after slashing jobs during the Great Recession, employers are still reluctant to replace them. They’ve learned to squeeze more work and revenue out of reduced staffs. Productivity and corporate profits have soared. But companies don’t want to add workers until they’re confident that consumers are spending enough to support higher sales.
Other factors are restraining hiring, too. More sophisticated software lets managers scrutinize changes in their businesses minute-by-minute. They can postpone hiring until they’re certain they need more workers.
Employers have good reason to wait, says economist Ken Mayland at ClearView Economics. A political standoff over the federal debt limit threatens to send the U.S. government into default next month. That would send interest rates soaring and might tip the economy back into recession.
Even if President Barack Obama and congressional Republicans agree to raise the borrowing limit, the deal will likely require deep cuts in government spending and possibly tax increases. Combined, those steps could slow the economy further.
The economy has already lost 493,000 government jobs since the recession ended, most of them eliminated by cash-short cities and counties. Now it faces the prospect of big cuts by the federal government, too.
Heightening the uncertainty are Europe’s debt crisis and the possibility that China’s efforts to tame inflation will slow its booming economy. Both factors could destabilize financial markets and reduce U.S. exports, one of the economy’s few strengths.
“Why would an employer hire now?” Mayland says. “It’s hunker down and wait and see.”
The Federal Reserve has already lowered short-term interest rates to near zero. And last month, it ended a Treasury bond-purchase program that was intended to strengthen the economy.
Congress, pointing to high budget deficits, won’t consider spending taxpayer money to jolt the economy with new government programs.
“We have painted ourselves into a corner,” Mayland says. “When you’re at zero interest rates and running a $1.5 trillion deficit, you don’t really have many policy options.”
Many analysts say the economy mainly needs time to recover from an implosion of the real estate market and a devastating financial crisis.
Normally, housing and construction would fuel a recovery. Lower interest rates would draw homebuyers into the market. Increased demand would encourage builders to hire construction workers and put up new houses.
Not so this time. Home prices are continuing to fall as banks dump foreclosed homes on the market. People’s home equity has shrunk.
The tepid recovery is taking a toll on consumers, whose spending accounts for 70 percent of economic activity. The Conference Board business group said last week that its consumer confidence index fell to 58.5 in June. A healthy reading is 90. At this point after the previous three recessions, the index averaged 87.
The low reading suggests consumers will be wary about spending. That could leave businesses even more cautious about hiring.
Businesses are nervous about the economic outlook now that the Fed and Congress seem to have ended their efforts to stimulate growth, says David Rosenberg, chief economist at Gluskin Sheff + Associates.
“The policy cupboard is pretty bare, and we can see what the emperor looks like disrobed,” Rosenberg says. “It’s not a pretty picture.”
AP Business Writers Christopher S. Rugaber and Derek Kravitz in Washington contributed to this report.