US labour market stabilises
The US added a better-than-expected 163,000 jobs in July, according to official figures on Friday, in a sign that the recent slowdown in the world’s largest economy may have stabilised.
The rise in non-farm payrolls beat expectations of 100,000 extra jobs and compares with a downwardly revised increase of 64,000 in June. The unemployment rate rose from 8.2 to 8.3 per cent.
If the improvement is sustained into August, then it will complicate the US Federal Reserve’s decision about whether to ease monetary policy further. It may also give a temporary boost to President Barack Obama, making it harder for his Republican challenger, Mitt Romney, to attack him on the economy in the election campaign.
But the rise does not change the fundamental picture of weak growth in the US because it is still too slow to bring down unemployment steadily over time as well as keep up with population growth.
“Today’s increase in the unemployment rate is a hammer blow to struggling middle-class families,” said Mr Romney. “President Obama doesn’t have a plan and believes that the private sector is ‘doing fine’. Obviously, that is not the case.”
In a post on the White House blog, Alan Krueger, chairman of the president’s Council of Economic Advisers, said: “While there is more work that remains to be done, today’s employment report provides further evidence that the US economy is continuing to recover from the worst downturn since the Great Depression.”
Details in the report were mixed. Data for previous months were revised down by 6,000 jobs, while wages and hours worked edged up slightly.
The main blackspot in the report was the more volatile household survey, which is used to calculate the unemployment rate. That survey found a fall in the size of the labour force, but an even bigger fall in jobs, leading the unemployment rate to rise a little.
“I think the numbers are very encouraging,” said Scott Minerd, chief investment officer of Guggenheim Partners in Santa Monica, California. “It indicates that the second-quarter slowdown in jobs growth may have been due to warm weather causing strong hiring in the first quarter.”
Scott Brown, chief economist at Raymond James research, said: “I think it’s really a sign of more of the same. We’re growing fast enough to absorb the growth in population, but not fast enough to bring down the unemployment rate.”
Overall jobs growth in the private sector totalled 172,000, offset by the loss of 9,000 jobs in the government sector.
Jobs growth was spread broadly across industries, with 25,000 net new jobs in manufacturing, 49,000 in business services, 38,000 in education and healthcare and 27,000 in leisure and hospitality. As they have been for the past five years, the main weakspots were finance and construction, with the building sector shedding another 1,000 jobs.
Meanwhile, the purchasing managers’ index for the service sector rose from 52.1 to 52.6, offering further evidence that growth, while feeble, is continuing.
“In short, the data look consistent with continued sluggish growth, with no collapse but no significant new strength either,” said Jim O’Sullivan, chief US economist at High Frequency Economics in New York.