--June jobs soft but pace of weakness to slow next few months
--Early to tell but US jobs seen pointing to 25-bp Aug Fed cut

By Mariko de Couto
New York, July 6 (BridgeNews) - The June employment report does not yet show that the rate of labor deterioration seen in the last several months has started to slow down, but economists say that parts of the latest data still point to a bottoming of the labor softness in the next few months.
The June employment data are too early to help make a conclusive call on the direction of Federal Reserve policy, but if anything, economists say that the report points to a 25-basis-point cut by the Fed at the next policy meeting on Aug. 21.
Non-farm payrolls fell 114,000 in June, compared with the consensus forecast of a 50,000 drop. But the May payrolls number was actually revised upward to a rise of 8,000 from the original reading of a 19,000 decline.
The unemployment rate was slightly better than expected at 4.5% compared with the consensus forecast of 4.6%. Many economists had expected the jobless rate to rise because the 4.4% originally reported for May was probably aberrant because of the low participation rate during that month. Average hourly earnings were up 0.3% as expected, while the average workweek was also within expectations at 34.3 hours, unchanged from May. As usual, the brunt of the current labor weakness was seen in the manufacturing sector which shed 113,000 jobs in June. And construction jobs, which many economists had expected to rise in June, fell 7,000. And unlike the May data, the frailty of manufacturing employment conditions were not really largely offset by the service-producing sector. Service producing jobs rose only 5,000.
Further weakness was seen in the 26,000 drop in the help-supply component of the report representing temporary jobs.
As long as this component remains weak, the labor market will retain its softness.
But on the flip side, economists said that some hidden bright spots are in the report.
The average workweek was unchanged in June and has been more or less static the last few months. This bodes well because companies are apparently not cutting hours amid the labor weakness.
And while the flimsiness of the manufacturing labor market appears to have spread a little to some of the non-goods producing sectors in June, some economists say that this development is actually a positive sign that the weakening phase of the job deterioration may be coming to an end. Besides, other economic data such as the employment index in the June National Association of Purchasing Management report released recently have started to signal a slowing of labor weakness. (Story .4792) Further, weekly unemployment claims--a leading indicator for labor conditions--had been on the decline in the last few weeks of June, even if they rose again in the latest week by 7,000 to 399,000. In the latest week, the 4-week average for new jobless claims fell 9,500 to 407,500 in the latest week.
Stephen Gallagher, director of U.S. economic research at Societe Generale, said that the latest jobs data shows that the Fed could cut again in August, though at this point, "there is no clear-cut message."