Unemployment rate edges up in July as job…
Unemployment rate edges up in July as job growth slows
August 3, 2007 at 2:13 a.m.
WASHINGTON – Hiring cooled off in July, pushing the nation's unemployment up to 4.6 percent, a six-month high.
The fresh snapshot of employment conditions around the country, released by the Labor Department Friday, also showed that new job creation slowed. Employers increased payrolls by 92,000 last month, the fewest add-ons in a single month since February.
Job losses in construction, manufacturing, retailing and by the government blunted gains in education and health care, professional and business services, and leisure and hospitality.
Even with the uptick from June's 4.5 percent unemployment rate, the current jobless rate is still low by historical standards. Those with jobs, meanwhile, did see modest wage gains.
Ken Mayland, president of ClearView Economics, likened the new figures to a modest middle ground, saying the job market is "running not too hot and not too cold."
Another report showed that growth in the service sector – an engine of the U.S. economy – also slowed in July.
The Institute for Supply Management's index dipped to 55.8, from 60.7 in June. Readings above 50 indicate expansion, while those below 50 indicate contraction.
On Wall Street, stocks sank. The Dow Jones industrials were down more than 100 points in morning trading.
The latest batch of economic reports is consistent with analysts' forecasts that the economy will grow gradually – but not like gangbusters- through the rest of this year. The economy has been coping with fallout from the sour housing market, problems with higher-risk subprime mortgages and troubles in the automotive sector.
The news comes as President Bush has been trying to counter weak public-approval ratings for his handling of the economy. Only 37 percent approve of his performance, close to a record low, according to a recent AP-Ipsos poll.
The new employment picture was weaker than economists expected. They were forecasting employers to add around 135,000 jobs in July and for the unemployment rate to hold steady at 4.5 percent. The new figures suggest the jobs climate wasn't as robust as first thought at the start of the third quarter.
However, Edward Lazear, chairman of the White House's Council of Economic Advisers, said the business appetite to hire "is still very strong." The labor market, he said, has been a "shining beacon" even as the economy made its way through a sluggish spell over the last year.
Wages grew modestly.
Average hourly earnings rose to $17.45, a 0.3 percent increase from June. That matched economists' expectations. Over the past 12 months, wages grew by 3.9 percent.
Wage growth supports consumer spending, a major ingredient in healthy overall economic activity. Still, workers pinched by high gasoline and food prices may not feel their paychecks are growing as much as they like.
Many economists expect the Fed to hold an important interest rate at 5.25 percent next week, extending a more than yearlong breather for borrowers. Before that, the central bank had boosted rates for two years to thwart inflation.
Fed Chairman Ben Bernanke and his colleagues, however, still believe inflation is a potential threat to the economy. One of the things they are watching closely is whether the sturdy labor market – which has allowed some workers to command higher wages and benefits – could add inflationary pressures.
Out-of-control inflation shrinks paychecks, erodes purchasing power and eats into the value of investments.
Job growth in May and June turned out to be slightly weaker than the government previously thought.
The economy added 126,000 jobs in June, fewer than the 132,000 first reported. In May, employers boosted payrolls by 188,000, versus 190,000 previously estimated.
The job market still remains strong, but the toll of housing slump, seesawing economic activity and high energy prices are catching up with employers.
Construction companies slashed 12,000 jobs in July. Manufacturers shed 2,000 and retailers cut a thousand. Some 28,000 government jobs were eliminated. In contrast, education and health care added 39,000. Leisure and hospitality expanded employment by 22,000. Professional and business services added 26,000 new positions.
The 4.6 percent jobless rate was the highest since January, when the unemployment rate also stood at 4.6 percent.
At the start of this year, the economy nearly stalled, growing at a pace of just 0.6 percent, the slowest in more than four years. The economy rebounded in the April-to-June quarter, logging a rate of 3.4 percent, the best in more than a year. Growth in the July-to-September quarter is expected to be more subdued, possibly just under 3 percent.
Across the country, the time it took to find a job grew.
The average time the 7.9 million unemployed people spent in their job searches was 17.2 weeks in July. up from 16.8 weeks in June.
Worries about the sour housing market along with fears that problems with higher-risk subprime mortgages will spread, caused stocks to crater last week. The carnage left the Dow Jones industrials down more than 585 points, its worst week in five years. Stocks have gyrated since then, reflecting lingering anxiety among investors.