MORE GLOOM LURKS BENEATH WEAK U.S. PAYROLL DATA / THE WALL STREET JOURNAL ( RECOMMENDED READING )

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JULY 2, 2009, 3:07 P.M. ET.

More Gloom Lurks Beneath Weak U.S. Payroll Data

By LIAM DENNING


June' payrolls numbers contradict the "green shoots" thesis. Worse, the data suggest that when they do appear, they won't exactly shoot up.

Since the U.S. officially entered recession in December 2007, 6.9 million jobs have been lost, on a seasonally adjusted basis. More bad news lies beneath Thursday's headline numbers. The average workweek fell to 33 hours, the lowest ever on record and 0.8 hours less than before the recession began.

If Americans were still clocking those extra 48 minutes a week now, then the same aggregate amount of work could get done with 3.3 million fewer employees. The implication is that, were it not for shorter workweeks, the unemployment rate would be 11.7%, not the official 9.5%.

Stealth underemployment is also evident in the rise in the number of workers taking part-time jobs due to the slack economy. Their ranks have doubled in this recession, to about 9 million, or 5.8% of the workforce.

The likelihood is that when economic activity picks up, employers will choose to increase hours on existing workers and bring back part-time workers to full-time status before making new hires.

That sets up a recovery that could rival the previous upswing in terms in joblessness. The difference between any coming upturn and the one that ended in December 2007 is that struggling workers will have less credit available to underpin living standards.

Paradoxically, labor woes will likely enable many firms to beat near-term earnings expectations, as wage costs dwindle or stagnate. But the unavoidable conclusion is that the consumer spending power needed to fuel a sharp rebound in the economy just isn't there.

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