WASHINGTON (Reuters) - U.S. employers hired at a dismal pace in June, raising pressure on the Federal Reserve to do more to boost the economy and further imperiling President Barack Obama's chances of reelection in November.
The Labor Department said on Friday non-farm payrolls expanded by just 80,000 jobs in June, falling short of forecasts though a tad higher than a revised May reading of 77,000.
Job creation during the month wasn't enough to bring down the country's lofty 8.2 percent unemployment rate. The report appeared sure to fuel concerns that Europe's debt crisis is shifting the U.S. economy into low gear.
"We're just crawling forward here," said Nigel Gault, an economist at IHS Global Insight in Lexington, Massachusetts.
Mitt Romney, Obama's Republican challenger, is focusing his campaign on the weak jobs market that has dogged Obama's presidency.
U.S. stock index futures extended their decline following the data, while yields on U.S. government debt fell.
There were other unsettling details in the report. The government said the economy created 1,000 fewer jobs during April and May than previously estimated.
The somber report might push the Federal Reserve closer to taking new actions to lower borrowing costs to encourage companies to increase hiring. Analysts polled by Reuters expected an increase in payrolls of 90,000 jobs.
Debt woes have bogged down much of Europe, sending some countries into recession. The euro zone crisis in turn has dulled economic growth around the world from China to Brazil. A survey on Monday found U.S. manufacturing contracted for the first time in nearly three years in June.
Europe is not the only worry weighing on the U.S. outlook. Washington plans enough belt-tightening at the start of 2013 to easily send the economy into recession. Cautious observers wonder if lawmakers can avoid this "fiscal cliff."
"If you are an American employer, with the uncertainty that you have in front of you for the next six months, there is just no reason to go out and do a lot of hiring right now," said Jeff Savage, an investment officer for Wells Fargo Private Bank in the Northwest, located in Portland, Oregon.
Job creation averaged 75,000 per month during the second quarter, compared with an average increase of 226,000 in the first quarter. Part of the slowdown could be because mild weather led companies to boost hiring in the winter at spring's expense.
But recent weakness in everything from retail sales to business sentiment suggests something more fundamental is at play.
"We're not expecting things to take off in the second half of the year," Sara Klein, an economist at Moody's Analytics in West Chester, Pennsylvania, said before the report was released. "Weather wasn't the only factor."
STORM BREWING
Until recently, the United States had been a relative bright spot in the global economy, especially in manufacturing. Most economists still expect lackluster growth over the rest of 2012 rather than a slip toward recession.
Moreover, Friday's report did show some hopeful signs. Average hourly earnings rose 6 cents to $23.50. Also, the length of the average work week increased to 34.5 hours and 156,000 workers entered the labor force.
But economic weakness abroad has lately become a formidable hurdle, as Obama has acknowledged, and global policymakers are acting like a storm is brewing.
China, the European Central Bank and the Bank of England all eased monetary policy on Thursday, raising speculation they had coordinated their action.
The Fed eased policy further last month, but the recent run of weak data has fueled speculation the U.S. central bank could deliver more stimulus when its next meeting concludes on August 1.
Even though June's pace of hiring was decidedly weak, the Fed might not want to unveil bold new measures now because the real storm could be months down the road. At the same time, Friday's data appears to increase the chances the Fed could start a new bond buying program, known as QE3, to lower interest rates.
"The market will see this as increasing the possibility that QE3 is coming," said Cary Leahey, economist and managing director at Decision Economics in New York.
