U.S. Companies Add 71,000 Jobs; Unemployment at 9.5%
U.S. companies hired fewer workers than forecast in July, evidence of what Federal Reserve Chairman Ben S. Bernanke has called an “uncertain” economic environment that may keep him focused on reviving growth.
Private payrolls that exclude government agencies rose by 71,000 after a June gain of 31,000 that was smaller than previously reported, Labor Department figures in Washington showed today. Overall employment fell by 131,000, reflecting the dismissal of temporary census workers, and the jobless rate held at 9.5 percent.
Stocks fell and the yield on the two-year Treasury note, the security most influenced by central-bank action, dropped to a record on speculation a stalled recovery will prompt the Fed to consider additional stimulus. The lack of jobs is preventing consumer spending, the biggest part of the economy, from gaining speed.
“What we are seeing now is more typical of the subpar recovery that we have been dealing with for a while,” said David Greenlaw, chief fixed-income economist at Morgan Stanley in New York. The jobs report “makes it somewhat more likely the Fed goes ahead and pulls the trigger next week, but I don’t think it’s a done deal. They’ll look to just stabilize things where they are and assess whether more is needed” in subsequent meetings.
The Standard & Poor’s 500 Index fell 0.4 percent to 1,121.64 at the 4 p.m. close in New York. The yield on the 2- year note was at .502 percent after falling to an all-time low of 0.4977 percent earlier in the day.
Another report showed consumer credit declined by $1.3 billion in June after a revised $5.3 billion drop a month earlier, the Federal Reserve said today. Borrowing has climbed only once, in January, since February 2009. Credit-card debt dropped in June to the lowest level since October 2005, a sign Americans may lack the confidence to borrow.
The decrease in overall employment followed a revised 221,000 drop in June that was 96,000 larger than previously estimated, today’s figures showed. Payroll estimates in the Bloomberg survey of 84 economists ranged from a decline of 160,000 to a gain of 10,000.
Private employment in July was led by gains in manufacturing and education and health services. Estimates in the Bloomberg survey ranged from increases of 20,000 to 150,000.
“The labor market is holding on and continues to be the foundation for a weak, but measurable, recovery,” said Ellen Zentner, a senior U.S. macroeconomist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York.
Economists surveyed forecast the jobless rate would rise to 9.6 percent last month. More workers left the labor force last month, helping prevent an increase in unemployment.
The Census Bureau said it let go about 143,000 of the people conducting the decennial population count from mid-June to mid-July. It still had about 200,000 temporary workers on staff as of July 17, indicating additional cuts to come that will keep distorting the payroll figures for months.
For that reason, economists say private payrolls will be a better gauge of the state of the labor market for much of 2010.
Manufacturing payrolls increased by 36,000 in July, more than the survey median of a 13,000 increase and reflecting a 21,000 rise in employment in the motor vehicle and parts industry.
Ford Motor Co., the second-largest U.S. automaker, said this week it plans to add 27 percent more UAW positions at its U.S. plants than originally planned. Ford agreed to add 1,975 jobs, 416 more than it originally intended, by 2012 to do work traditionally done by suppliers. The jobs at nine U.S. plants will be filled by a mix of idled current Ford workers and new hires, Jennifer Flake, a spokeswoman, said in an interview.
A report this week showed manufacturing expanded in July at the slowest pace of the year as orders and production decelerated, signaling employment gains may cool.
United Technologies Corp. said July 26 it expects restructuring actions from the first half of the year to result in job cuts of about 2,400 hourly and salaried employees. The maker of Carrier, Pratt & Whitney and Sikorsky products, had eliminated 900 jobs as of June 30 and is targeting most of the rest of the reductions for 2010 and 2011.
In addition to census firings at the federal level, today’s report showed state and local government agencies cut payrolls by 48,000 workers as they try to close budget gaps.
Among other service providers, financial firms cut jobs for the seventh time in the past eight months and temporary-help agencies reduced staff for the first time since September. Payrolls at retailers and transportation and warehousing companies, in addition to education and healthcare providers, climbed.
Delta Air Lines Inc., the world’s largest carrier, plans to hire 1,000 workers at its 25 biggest U.S. airports to help with planes that are flying with near-record percentages of seats filled and cope with weather disruptions, Chief Executive Officer Richard Anderson said last month.
Wages were one bright spot in the report as hourly earnings climbed 0.2 percent in July from the prior month, more than anticipated. Employers also lengthened the average workweek by 6 minutes to 34.2 hours.
The increase in hours and wages brought the average weekly paycheck to $772.58, up 0.5 percent from June.
The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- held at 16.5 percent.
Nobel Prize-winning economist Joseph E. Stiglitz said the U.S. still faces an “anemic recovery,” requiring another round of “better designed” stimulus measures from the government.
“The recovery is so weak that it is not strong enough to generate new jobs for the new entrants in the labor force, let alone to find jobs for the 15 million Americans who would like a job and can’t get one.” Stiglitz told Bloomberg Television in an interview in Sydney yesterday.
The jobs report may help determine whether the Fed takes any new measures at its next meeting on Aug. 10 aimed at boosting growth or sticks to its outlook that the “extended period” of interest rates close to zero and a near-record $2.3 trillion balance sheet will eventually bring down unemployment.
“We have a considerable way to go to achieve a full recovery in our economy,” Bernanke said in a speech this week to southern U.S. state lawmakers in Charleston, South Carolina. Still, “rising demand from households and businesses should help sustain growth,” and consumer spending “seems likely to pick up in coming quarters from its recent modest pace.”
Options outlined by Bernanke last month include enhancing the low-rate commitment, reducing the 0.25 percent rate the Fed pays on banks’ reserve deposits and maintaining or expanding the amount of assets on the balance sheet.
The economy, jobs and the budget deficit are likely to be top issues in November elections that will decide control of Congress. Heading into the campaign season, the Obama administration is facing public pessimism about the direction of the economy.
More than seven in 10 Americans say the economy is still mired in recession, and the country is conflicted over how to balance concerns over joblessness and the federal budget deficit, according to a Bloomberg National Poll.
Americans are torn about whether the federal government should focus on curbing spending or creating jobs, the poll conducted July 9-12 showed. Seven of 10 Americans say reducing unemployment is the priority. At the same time, the public is skeptical of President Barack Obama’s stimulus program and wary of more spending, with more than half saying the deficit is “dangerously out of control.”
Support for Obama has fallen as the jobless rate has been slow to retreat. His job approval over a three-day period ending July 31 was 44 percent, compared with 54 percent at this time last year, according to a Gallup poll.
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