New Jobs in July Disappoint, But Unemployment Rate Drops to 7.4%

Andrew Klips |

The U.S. created fewer jobs than expected in July, however, the nation’s unemployment rate fell to its lowest level since December 2008, according to the much-anticipated employment situation report from the Labor Department on Friday.

Total nonfarm payroll employment increased by 162,000 in July, short of economist expectations of 175,000 new jobs.  The unemployment rate fell to 7.4 percent from 7.6 percent in June, reflecting more people finding work and a tepid rise in people giving up on looking for a job.  Economists predicted the unemployment rate would come-in at 7.5 percent last month.

Over the past 12 months, the economy has averaged adding 189,000 jobs per month.  That lags the type of job creation that historically has happened during other economic recoveries.

The number of estimated unemployed people in July was 11.5 million, down by 1.2 million from the same time in 2012 when the unemployment rate was 8.2 percent.

The civilian labor force participation rate was 63.4 percent in July, down 0.1 percent from June. The employment-population ratio was unchanged at 58.7 percent.

The so-called U6, a broader gauge of unemployment that includes all the people that want a full-time job, but can’t find one, dropped from 14.3 percent in June to 14.0 percent in July.

The report shows a somewhat weak labor market that keeps sluggishly moving forward.  Last month, the markets cheered hefty upward revisions in previous month’s figures.  In Friday’s report, the rug was pulled-out on prior months, with May’s job growth estimate lowered to 176,000 from the previously announced 195,000 and growth for June lowered from 195,000 to 188,000.

Employment increased in retail trade (+47,000 jobs in July and 352,000 in last 12 months), food services and drinking establishments (+38,000 jobs in July and 381,000 in last 12 months), financial activities (+15,000 jobs in July and 120,000 in last 12 months) and wholesale trade (+14,000 jobs in July and 83,000 in last 12 months).   Other gains for the month were shown in professional and business services.

Manufacturing employment remained flat for July, a place it has been essentially stuck for the past 12 months.  The health care industry was virtually unchanged in July and continues to trail 2012 with only an average of 16,000 new jobs per month so far in 2013, compared to 27,000 per month in 2012.  All other industries showed little change in July.

The average workweek for all employees on private nonfarm payrolls decreased by 0.1 hour in July to 34.4 hours.  In July, average hourly earnings for all employees on private nonfarm payrolls dropped by 2 cents to $23.98, following a 10-cent increase in June.  Compared to last July, average hourly earnings were up 1.9 percent, or 44 cents.

The markets didn’t find a catalyst in the mixed report following another record close on Thursday.  The Dow Jones is lower by 39 points, the S&P 500 us off by 3 points, while the Nasdaq has edged down 1 point.

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