Jobs Picture Worsens With 131,000 Losses; 9.5% Rate

08/06/2010 23:22

From CNBC:

U.S. employment fell for a second straight month in July as more temporary census jobs ended while private hiring rose less than expected, pointing to an anemic economic recovery.

Non-farm payrolls fell 131,000, the Labor Department said on Friday as temporary jobs to conduct the decennial census dropped by 143,000. Private employment, considered a better gauge of labor market health, rose 71,000 after increasing 31,000 in June.

In addition, the government revised payrolls for May and June to show 97,000 fewer jobs than previously reported.

Analysts polled by Reuters had forecast overall employment falling 65,000 and private-sector hiring increasing 90,000.

"We're seeing an economy that's moving ahead slowly but not creating net on balance a lot of new jobs, and it points to continued expectations the economic slowdown we've seen will probably extend another two to three months, if not longer," said Fred Dickson, chief market strategist at The Davidson Cos. in Lake Oswego, Ore.

The unemployment rate was unchanged at 9.5 percent in July, just below market expectations for a rise to 9.6 percent. The steady jobless rate largely reflected a drop in the labor force as discouraged workers gave up the search for jobs.

Job growth has taken a step back after fairly strong gains between February and April, putting in jeopardy the economy's recovery from its worst downturn since the 1930s.

Growing unease over the health of the economy is weighing on President Barack Obama's popularity and hurting the Democratic Party's prospects of keeping control of Congress in November's mid-term elections.

The state of the labor market is one of the factors that will determine the timing of the Federal Reserve's first interest rate rise since reducing overnight lending rates to near zero in December 2008.

Fed Chairman Ben Bernanke has said the U.S. central bank could take steps to further ease monetary policy if the recovery were to falter.

The central bank holds its next policy-setting meeting on Tuesday and the employment report is likely to keep debate alive on whether more easing is needed.

Economic growth slowed to a 2.4 percent annual rate in the second quarter after expanding at a 3.7 percent pace in the first three months of this year.

Work Week, Wages Increase

There were some positive elements in the report. The average workweek edged up to 34.2 hours after slipping to 34.1 hours in June. Employers normally increase working hours for existing staff before hiring additional workers.

Average hourly earnings increased by four cents to $22.59 last month.

"Average hourly earnings, our only monthly proxy of wages, rose 0.2 percent after a distressing no gain in June," said Cary Leahey, economist at Decision Economics in New York.

"Add that together and it suggests that the liftoff point for GDP is not that bad for the third quarter. No one will lower their GDP forecast for the third quarter based on this report."

Despite the tepid private sector jobs growth, the pace of layoffs has moderated significantly from the first quarter of last year, when employers were culling an average of 752,000 jobs a month.

Last month, the dominant service sector added 38,000 jobs after June's 34,000 gain. More disturbing, temporary help services, seen as a harbinger of future permanent hiring, fell 5,600 after increasing 11,200. Temporary employment gains had averaged 45,000 per month from October 2009 to May.

State and local governments, struggling with huge budget deficits, purged more workers last month, combining with mass layoffs of temporary federal census workers to push government payrolls down  by 202,000 compared to a 252,000 drop in June.

Payrolls in the goods-producing sector unexpectedly rose in July, reversing the prior month's decline as manufacturing employment was boosted by auto makers who did not shut down their plants in July for retooling. Manufacturing jobs increased 36,000 after gaining 13,000 in June.

The sector is leading the economic recovery, which started in the second half of 2009. However, construction employment fell 11,000. A strike in the sector reduced construction payrolls by 10,000 last month.



Share |