Payrolls Rose More Than Forecast in July as Unemployment Fell
American employers added more jobs than forecast in July and the unemployment rate fell for the first time in four months, easing concern the world’s largest economy was sliding into a recession.
Payrolls rose by 117,000 workers after a 46,000 increase in June that was larger than earlier estimated, the Labor Department said yesterday in Washington. The median estimate in a Bloomberg News survey called for a gain of 85,000. The jobless rate dropped to 9.1 percent as discouraged workers left the labor force. Average hourly earnings climbed 0.4 percent.
The economy needs to generate faster job growth to spur consumer spending, which makes up 70 percent of the economy and rose last quarter at the slowest pace in two years. At the same time, the report may relieve pressure on Federal Reserve policy makers to take immediate steps to sustain the recovery when they meet next week.
“It probably removes the possibility of the Fed taking any outright action at next week’s meeting,” said David Greenlaw, chief financial economist at Morgan Stanley in New York. “The labor market is not where it needs to be, but from the standpoint of shifting the trend we had the last couple months, this report was important.”
Stocks ended the day mixed, with the Dow Jones Industrial Average up 0.5 percent at 11,444.61 and the Standard & Poor’s 500 Index down less than 0.1 percent at 1,199.38. The Dow swung in a 416-range, one day after a 4.3 percent plunge that capped an 11 percent decline from its April 29 peak for the year.
President Barack Obama, three days after signing a measure to cut at least $2.1 trillion from federal budget deficits over a decade, used the jobs report to renew his call for an extension of unemployment benefits and a temporary payroll tax reduction.
“There’s no contradiction between us taking some steps to put people to work right now and getting our long-term fiscal house in order,” Obama said yesterday at the Washington Navy Yard, where he was promoting a proposal to give tax credits to companies that hire unemployed military veterans. “The more we grow, the easier it will be to reduce our deficits.”
The jobless rate declined as 193,000 people left the labor force and the number of unemployed dropped by 156,000. The share of the eligible population holding a job declined to 58.1 percent, the lowest since July 1983.
“More and more individuals are giving up the job search,” said Patrick O’Keefe, a former deputy assistant secretary of labor and current director of economic research at J.H. Cohn LLP in Roseland, New Jersey.
Private hiring, which excludes government agencies, climbed 154,000 last month after an 80,000 gain.
Some companies are firing workers to keep costs down as the economy slows and uncertainty builds over the European default risk and U.S. regulatory and tax costs.
Cisco Systems Inc. (CSCO), the largest networking-equipment maker, plans to eliminate about 6,500 jobs, or 9 percent of its full- time global workforce, to help trim $1 billion in annual costs and step up profit growth.
Government payrolls decreased by 37,000 in July, the ninth straight drop. Employment at state governments fell 23,000 last month, almost entirely due to a partial shutdown of the Minnesota government.
Payroll increases of around 125,000 a month are needed to keep the unemployment rate steady, while about 200,000 a month would bring it down a percentage point over a year, according to Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.
In his semi-annual testimony to Congress last month, Fed Chairman Ben S. Bernanke said the “economy still needs a good deal of support.”
The Federal Open Market Committee meets for one day on Aug. 9. At their last meeting in June, Fed officials decided to keep the central bank’s balance sheet at a record to spur the slowing economy after completing $600 billion of bond purchases.
The economy grew at a less-than-forecast 1.3 percent pace in the second quarter following revised growth of 0.4 percent in the first three months of the year that was less than previously estimated, Commerce Department figures showed last week. Consumer spending grew 0.1 percent, the smallest gain since the second quarter of 2009, the final months of the recession.
Factory payrolls jumped by 24,000 in July after an 11,000 gain in the previous month. Half the increase was in the auto industry, which had fewer seasonal layoffs than typical for July, the Labor Department said.
Employment at service-providers increased 75,000 in July, the most in three months. Construction employment rose by 8,000 workers, the biggest gain since February.
Average hourly earnings climbed 10 cents to $23.13, the report showed.
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 -- decreased to 16.1 percent from 16.2 percent.
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