Statement of Scott Lilly

This morning's report from the Labor Department paints a grim picture concerning the prospects for the U.S. economy and for working families. By far the best news was the fact that the overall number of jobs increased by 112,000. But that news was more than offset by a decline in average hours worked, a decline that was much larger on a percentage basis than the growth of new jobs. The result is that even though there were more people on payrolls in June than had been true in May, they worked fewer total hours.

Also disturbing is the weakness in wage growth and the probability that real or inflation adjusted wages will have fallen for the 7th straight month when the Consumer Price Index for June is released later this month. The two cent increase in nominal wages will become a five cent drop if the CPI indicates that inflation continued in June at the same pace as during the earlier months in 2004. That would leave real or inflation adjusted wages at 23 cents below the levels of last November.

The declining hours worked and the flat nominal wage growth combined to cut weekly earnings which fell by $2.45 before adjusting for inflation. If inflation in June continues at the level of previous months, that drop will be $4.65 and weekly earnings will be nearly $11 or 2 percent below where they were last November. It is little wonder that Wal-Mart and Target reported weak sales in June. The combination of high levels of consumer debt and falling wages and household income do not bode well for retail sales or economic expansion.

Based on this morning's numbers the economy has added 1,266,000 jobs since December 2003. That yields a monthly expansion of employment of 0.16 percent or almost exactly half the rate of job growth of previous economic recoveries.

Scott Lilly is a senior fellow at the Center for American Progress.