Hiring Slows, Unemployment Grows
Hiring slowed in July as employers added just 113,000 new jobs, propelling the unemployment rate to a five-month high of 4.8 percent and providing fresh evidence that companies are growing cautious amid high energy prices. Wages grew solidly.
The latest snapshot Friday from the Labor Department added to the evidence from a variety of economic barometers that the economy is slowing and inflation is rising. Those conflicting forces present the Federal Reserve with a dilemma over interest rates when policymakers meet next week.
The tally of new jobs last month did not match the 124,000 added in June and was the lowest total since May, when payrolls grew by 100,000.
The civilian unemployment rate jumped from 4.6 percent in June to 4.8 percent in July, matching the jobless rate in February. The last time the unemployment rate was higher was in December, at 4.9 percent.
Economists had forecast a gain of about 145,000 jobs and an unemployment rate of 4.6 percent.
Manufacturers and information companies — including publishers and telecommunication firms — shed jobs in July, while employment in retailing and in the government was flat, combining to restrain overall hiring.
Workers' average hourly earnings rose to $16.76 in July, 0.4 percent higher than in June. Economists anticipated a 0.3 percent rise. Wage growth is welcomed by workers. But a rapid and sustained pickup in wages, if not blunted by other economic forces, can touch off inflation fears.
Federal Reserve Chairman Ben Bernanke told Congress last month that he was concerned about rising prices, but hoped a slowing economy eventually would ease inflationary pressures.
The Fed is meeting on Tuesday, and some economists believe the central bank will leave interest rates alone, taking its first break after tightening credit for more than two years.
Friday's weaker job growth would justify such a breather, offering more evidence of slowing economic activity.
Others Fed-watchers who are worried about inflation think policymakers have another interest-rate jump in store.
The Fed steadily has raised rates 17 times since June 2004, each in increments of one-quarter of a percentage point, to prevent inflation from taking off.
The hiring slowdown comes as companies cope with soaring energy prices and higher interest rates. Oil prices reached a new closing high of $77.03 a barrel in the middle of July, though they have moderated slightly since then.
In these conditions, businesses and consumers — engines of economic activity — have turned cautious. That, in turn, has slowed the economy.
Growth in the second half of this year is expected to stay subdued, at pace of about 2.5 percent to 3 percent, according to projections from some economists.
The economy slowed to a pace of 2.5 percent in the April-to-June quarter, compared with the 5.6 percent growth rate in the first three months of the year.
In July, manufacturers cut 15,000 jobs, reversing the gain of 22,000 the month before. Employment was flat in retailing, after the sector shed just over 4,000 jobs in June. Government employment also held in check in July, following a gain of 15,000 jobs the month earlier. Employment in the information industry, including publishing and telecommunications, dropped by 9,000.
The report showed that 17.3 weeks was the average time that the 7.2 million unemployed spent searching for work in July; the comparison for June was 16.2 weeks.