Employers added fewer workers than forecast in July even as the U.S. jobless rate fell, showing uneven labor-market gains as the world’s largest economy struggles to gain momentum.
Payrolls rose by 162,000, the least in four months, and the jobless rate dropped to 7.4 percent from 7.6 percent. The workweek shrank, and hourly earnings fell for the first time since October.
“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 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.”
Federal Reserve policy makers are watching the labor market as they debate whether to start trimming $85 billion a month in asset purchases as early as September. The slower pace of hiring suggests some employers are confident they can meet demand with current staffing levels until the economy shakes off the effects of federal tax increases and spending cuts.
Stocks and Treasuries rose on bets the report will make the Fed less inclined to start scaling back stimulus at its next meeting. The Standard & Poor’s 500 Index rose 0.2 percent to 1,709.67 at the close of trading in New York. The yield on the 10-year U.S. note fell to 2.60 percent from 2.71 percent late yesterday.
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.
Retailers added almost 47,000 workers, the most in eight months. Employment in education and health services showed the smallest gain in a year. Construction employment fell and manufacturing rose for the first time in five months.
Private employment, which excludes government agencies, rose 161,000 after a revised gain of 196,000. They were projected to rise by 195,000, the survey showed.
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 has 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.”
Improving consumer confidence and auto sales have encouraged other companies such as Amazon.com Inc. and Ford Motor Co. to take on more workers.
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, reported second-quarter per-share profit excluding some items that beat the average estimate of analysts surveyed by Bloomberg. The Dearborn, Michigan-based company 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 a conference call yesterday. “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 figures yesterday from Ward’s Automotive Group.
The Institute for Supply Management’s factory index, released yesterday, showed manufacturing expanded in July at the fastest pace in more than two years, sparked by surges in orders and production that signal companies are growing more optimistic about the economic outlook.
Sustained gains in employment help explain recent increases in consumer sentiment. The Bloomberg Consumer Comfort Index rose last week to the strongest reading since January 2008.
Today’s Labor Department data showed average hourly earnings fell 0.1 percent to $23.98 in July from the prior month, and were up 1.9 percent over the past year. The average workweek for all workers dropped to 34.4 hours from 34.5 hours.
A separate report today 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 increase the prior month. Incomes advanced 0.3 percent.
Improving prospects for the economy in the second half of the year may sustain the job market. Economists surveyed by Bloomberg from July 5 to July 10 project growth will average 2.5 percent during the period, according to the median.
The Fed may begin tapering the pace of its asset purchases in September, according to a growing number of economists surveyed by Bloomberg from July 18 to July 22.
“Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated,” policy makers said in their statement this week 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.”
Today’s 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.”
Gross domestic product, the value of all goods and services produced, grew at a 1.7 percent annualized rate in the April through June period after a 1.1 percent advance in the prior three months, Commerce Department data showed on July 31.
The Labor Department’s household survey showed that part-time employment climbed by 174,000 in July, exceeding a 92,000 gain in full-time hiring.
The number of discouraged workers, those not looking for a job because they don’t believe one is available, climbed to 988,000 in July from 852,000 a year ago. The share of the working-age population in the labor force dropped to 63.4 percent from 63.5 percent.