U.S. jobless rates rises to 8.3% in July

by The City Wire staff ([email protected]) 22 views 

Payrolls in the U.S. climbed more than forecast in July, boosted by a pickup in employment at automakers, even as the jobless rate unexpectedly rose to a five-month high.

The increase of 163,000 followed a revised 64,000 gain in June payrolls that was less than initially reported, Labor Department figures showed Friday (Aug. 3) in Washington. The median estimate of 89 economists surveyed by Bloomberg News called for a gain of 100,000. Unemployment rose to 8.3%.

Uneven hiring may hold back consumer spending, the biggest part of the economy, as a global slowdown and impending U.S. tax changes weigh on businesses. Job cuts at companies from Morgan Stanley to Cisco Systems Inc. mean unemployment may remain elevated, one reason the Federal Reserve this week said it is prepared to take new steps if needed to boost growth.

“It’s good to see hiring pick up a little bit,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. “Some of the details don’t make it an unequivocally good report. The labor market is expanding but at a slower pace. The Fed is still very much in play for the September meeting.”

Private payrolls, which exclude government agencies, rose 172,000 after a revised gain of 73,000. They were projected to rise by 110,000, the survey showed.

The unemployment rate was forecast to hold at 8.2%, according to the survey median. Estimates in the Bloomberg survey ranged from 8.1% to 8.3%. The report showed more people left the labor force.

Factory payrolls increased by 25,000, more than twice the survey forecast of a 10,000 increase and boosted by a 12,800 pickup in employment at makers of motor vehicles and parts.

The figures may have reflected fewer shutdowns at automakers for annual retooling related to the new model year, indicating the jump will be reversed this month. Chrysler Group LLC and Ford Motor Co. are among companies that said they would idle fewer plants.

“Economic fundamentals have remained soft,” Jenny Lin, Ford’s senior U.S. economist, said on an Aug. 1 conference call with analysts. “Job growth as measured by non-farm payroll is modest.”

Employment at private service-providers increased 148,000, the most in five months and reflecting more jobs in education and health services. Construction companies cut payrolls by 1,000 workers and retailers added 6,700 employees. Government payrolls decreased by 9,000 for a second month.

Average hourly earnings rose by 2 cents to $23.52 in July, today’s report showed. The average work week for all workers held at 34.5 hours.

The underemployment rate – which includes part-time workers who’d prefer a full-time position and people who want work but have given up looking – increased to 15% from 14.9%.

The jobless rate, derived from a separate survey of households, has exceeded 8% since February 2009, the longest stretch in monthly records going back to 1948.

Fed officials, after meeting this week, left unchanged their statement that economic conditions would likely warrant holding the benchmark interest rate target near zero at least through late 2014. They said unemployment “remains elevated.”

Policy makers “will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” the Fed statement said. Economic growth is expected to “remain moderate over coming quarters and then to pick up very gradually.”

Monthly payroll growth of about 100,000 is needed to keep the jobless rate stable, while growth of roughly 150,000 to 200,000 is needed to lower unemployment, Fed Chairman Ben Bernanke said at a news conference in April, citing a “very rough estimate.”

Through June, the U.S. had recovered about 3.8 million of the 8.8 million jobs lost as a result of the 18-month recession that ended in June 2009.

Employment and the economy are central themes in the presidential campaign, with President Barack Obama and Republican challenger Mitt Romney debating whose policies would best boost the expansion.

Gross domestic product grew at 1.5% annual rate in the second quarter after a 2% gain in the first three months of the year, according to Commerce Department figures. Household purchases, which account for about 70% of GDP, grew at the slowest pace in a year.

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