Employees took home less pay and worked fewer hours in July and job growth was the weakest in four months even as the U.S. jobless rate fell, underscoring uneven progress in the labor market.
Payrolls rose by 162,000 last month, while unemployment dropped to 7.4 percent from 7.6 percent, the Labor Department reported yesterday in Washington. The workweek on average was the shortest in six months and hourly earnings fell for the first time since October.
“We are losing a bit of momentum in the labor market,” said Gennadiy Goldberg, a New York-based strategist at TD Securities Inc., which projected a 165,000 gain in payrolls. “Earnings were a bit disappointing. Consumers really need to see wage growth to help accelerate their spending.”
Federal Reserve policy makers are watching the job market as they debate whether to start trimming $85 billion a month in asset purchases as early as September. Slower hiring shows some employers are meeting demand with current staffing levels until the U.S. recovers from the effects of federal spending cuts and tax increases that led to weak first-half growth.
Hourly earnings fell 0.1 percent on average in July from the prior month to $23.98. They were up 1.9 percent over the past year, according to the Labor Department data. The mean workweek for all workers declined six minutes to 34.4 hours.
Another report yesterday from the Commerce Department showed household purchases, which account for about 70 percent of the economy, rose 0.5 percent in June after a 0.2 percent gain the prior month. Adjusting for inflation, consumer spending increased 0.1 percent in June, the same as in the previous month. Incomes climbed 0.3 percent.
The jobs report showed retailers added almost 47,000 workers, the most in eight months, while restaurants took on 38,400. The combined increase in the two industries accounted for 53 percent of all net new hires in July.
Employers also took on 117,000 female workers last month, more than double the 45,000 men added to payrolls. The industries with the biggest increases in women hires were retail and leisure and hospitality.
“The good news is that women are gaining a lot of jobs,” said Joan Entmacher, vice president for family economic security at the National Women’s Law Center in Washington. “The bad news is that they’re in low-wage occupations.”
The Labor Department’s household survey, used to calculate the jobless rate, showed that part-time employment climbed by 174,000 in July, exceeding a 92,000 gain in full-time hiring.
Employment in education and health services had the smallest gain in a year, yesterday’s figures showed. Payrolls fell in construction, and rose in manufacturing for the first time in five months.
Private employment, which excludes government agencies, advanced 161,000, less than the median forecast in the Bloomberg survey and following a revised gain of 196,000.
“This isn’t a disaster of a report but it shows the U.S. remains vulnerable to a slower economic-growth performance,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who also had projected payrolls would rise by 165,000. “This isn’t the kind of progress the Fed would like to see. At the margin, it keeps them cautious.”
Treasury yields fell and stocks rose yesterday as investors speculated the data would mean the central bank will continue its stimulus efforts. The Standard & Poor’s 500 Index advanced 0.2 percent to close at 1,709.67 in New York. The yield on the 10-year U.S. note declined to 2.60 percent from 2.71 percent late the previous day.
The median forecast of 93 economists surveyed by Bloomberg called for a 185,000 payrolls gain in July. The increase in June was revised down to 188,000 from 195,000.
Among those finding a job was Christopher Welch, who started work as a credit manager at a community bank in Gahanna, Ohio, on July 1 after being unemployed for about 4 months when his previous position at a bank was eliminated.
“My background definitely proved to be something that was of value to my current employer,” said Welch, 48. “I figured it would really be tough sledding out there, so I was really quite concerned.”
Steve Ulrich is counting on further improvement in the job market. The Columbus, Ohio, resident started looking for work in June after the company he owned for six years, Your Complete Web Presence, failed to turn a profit.
“I’m taking it one day at a time,” said Ulrich, 60, who previously worked in the marketing department of a software company. “I’m hoping my skills are still transferable.”
Amazon.com, the world’s biggest Web retailer, announced in July it is adding more than 5,000 full-time jobs at U.S. warehouses to meet demand. The Seattle-based company also is hiring 2,000 customer-service staff, including part-time and seasonal workers.
Ford, the second-largest U.S. automaker, has said it’ll hire 3,000 salaried employees this year, 800 more than originally planned.
“The automotive sector of our economy has now contributed greatly to overall growth during this expansion,” Ellen Hughes-Cromwick, chief economist at Ford, said on an Aug. 1 conference call. “Job and income gains are positive and interest rates remained relatively low.”
Cars and light trucks sold at a 15.6 million annualized rate in July and 15.9 million the prior month, the strongest back-to-back readings since late 2007, according to Ward’s Automotive Group.
A growing number of economists surveyed by Bloomberg from July 18 to July 22 projected the Fed will begin tapering the pace of its asset purchases in September.
“Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated,” policy makers said in a July 31 statement at the conclusion of a two-day meeting in Washington. The Federal Open Market Committee also said it will maintain its $85 billion in monthly bond buying. “Economic growth will pick up from its recent pace and the unemployment rate will gradually decline.”
The latest jobs data will “keep the debate alive over the prospects for a September tapering,” said William O’Donnell, head U.S. government bond strategist at RBS Securities Inc. in Stamford, Connecticut, one of 21 primary dealers that trade with the Fed. “Another weaker-than-expected employment number in September might delay it.”
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