Job-creation picks up steam in July
(MoneyWatch) New government figures show the U.S. economy added more jobs in July than in the four previous months, although the nation's unemployment rate ticked up slightly.
Total nonfarm payroll employment rose by 163,000 last month, with more jobs added in professional and business services, manufacturing, and restaurants and bars, according to the U.S. Labor Department. That rate of job creation was slightly stronger than had been forecast, with many economists expecting companies to have added 100,000 jobs in July.
The overall jobless rate rose to 8.3 percent, up from 8.2 percent in June, with a federal survey of U.S. households showing that fewer people had jobs. The Labor Department's survey of businesses, which is regarded as more reliable, showed job gains in the private sector. By contrast, the government continued to shrink last month, eliminating 9,000 jobs, according to the latest data.
Employers added 64,000 jobs in June, a third straight month of weak hiring. In the second quarter, the economy created an average of 75,000 jobs a month, one-third of the 226,000 jobs a month created in the first quarter.
The recent growth rate is too low to significantly reduce unemployment. The economy needs to add upwards of 100,000 jobs a month simply to keep pace with the number of people entering the labor force. To make deeper inroads into the jobless rate, at least 250,000 jobs must be created each month.
The labor market has improved since mid-2011, when the unemployment rate reached 9.2 percent. More recently, the four-week average of people claiming unemployment benefits, a measure of layoffs, has fallen for six consecutive weeks.
Despite these positive signals, job seekers still face unusual difficulty finding work. The ratio of unemployed people to job openings remains above 3-to-1, according to the Economic Policy Institute, a Washington think-tank. That figure is down from its peak of 6.7-to-1 during the height of the recession in the summer of 2009, but the subpar pace of job creation still leaves millions of Americans with little hope of finding employment.
"With construction getting stronger and retail sales likely improving in the fall, it is reasonable to expect job growth in the range of 160,000 to 180,000 over the rest of the year," said economist Dean Baker of the Center for Economic and Policy Research in a report today on the July labor numbers. "This is better than the last few months, but it will take a decade at this pace to make up the jobs deficit."
With 12.8 million Americans still unemployed, relief appears unlikely to come anytime soon. The Federal Reserve said this week that the economy was decelerating, noting that "growth in employment has been slow in recent months." The economy grew at an annualized rate of 1.5 percent from April through June, down from 2 percent in the first three months of the year and from 4.1 percent in the fourth quarter of 2011.
That slowdown is visible across the economy. For instance, the key manufacturing sector shrank for a second straight month in July, according to a recent private survey. Through the first quarter, manufacturers had been among the few bright spots in what economists agree has been a historically lackluster recovery. But the ongoing economic turmoil in Europe and slowing growth in China, India, and other emerging markets has weakened demand for U.S. exports. That has reduced factory hiring.
Consumer spending, while showing some resilience given the faltering economy, has also declined of late. Personal expenditures fell $1.3 billion in June, or 0.1 percent, compared with the previous month, the U.S. Commerce Department said this week.
The economy's loss of momentum has raised expectations that the Fed would soon ease monetary policy in a bid to spur growth. But while Fed officials said Wednesday that the economic outlook is darkening, they left policy unchanged.
Despite the modestly stronger job numbers in July, the central bank is likely to remain under pressure to take action, especially from investors who have pushed up the stock market in recent weeks in anticipation of help from the Fed. The Fed's policy options include a third round of bond purchases aimed at forcing down long-term interest rates and lowering the interest the Fed pays banks on their reserves in a bid to boost lending.
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