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Economy in Brief

U.S. Payroll Growth Weak, Slowdown Widespread
by Tom Moeller August 6, 2004

Non-farm payrolls grew only 32,000 in July following a weak June gain of 78,000 (revised lower) and a strong May increase of 208,000 (also revised lower). Consensus expectations had been for a 240,000 job gain in July.

From the separate household survey the unemployment rate dipped to 5.5% as a result of a huge 629,000 (1.5% y/y) rise in employment. The labor force also surged 577,000 (+0.8% y/y) as the labor force participation rate rose again to 66.2% versus 66.0% in June and four months at 65.9%.

The breadth of increase amongst private non-farm payrolls at 49.5% fell below 50% for the first month since last December. The three month diffusion index of hiring dropped to 61.0 versus a high of 74.5 in May.

Private service producing industries account for the slowdown in job growth. Growth of 14,000 in July (0.0% m/m, 1.5% y/y) compares to a 91,000 June increase and a three month average gain in May of 223,000. Job losses have been widespread amongst service industries: financial -23,000 m/m, +0.2% y/y; information -5,000 m/m, -0.6% y/y; retail -19,100 m/m, +0.9% y/y; trade & transportation -11,000 m/m, +1.1% y/y; temporary help services +4,900 m/m, 8.8% y/y.

Factory sector payrolls grew 10,000 (-0.3% y/y) in July. The breadth of factory sector hiring still indicates growth with readings of 54.2 and 51.2 in the last two months, but these numbers are down from figures above 60.0 in the prior three months. Hiring in transportation industries has fallen in the last four months.

Construction sector hiring grew just 4,000 (2.9% y/y) after a 3,000 June increase and gains that averaged 39,000 during the prior three months.

The index of aggregate hours worked (employment times hours worked) grew 0.3% and began the third quarter 0.2% above 2Q which rose 1.3% (AR) versus 1Q.

Average hourly earnings rose 0.3% (1.9% y/y).

The Federal Reserve Bank of San Francisco in a report titled "The Computer Evolution" discusses the computer's effect on jobs and income.

Employment July June Y/Y 2003 2002 2001
Payroll Employment 32,000 78,000 1.1% -0.3% -1.1% 0.0%
  Manufacturing 10,000 -1,000 -0.3% -4.8% -7.2% -4.8%
Average Weekly Hours 33.7 33.6 33.6 33.7 33.8 34.0
Average Hourly Earnings 0.3% 0.1% 1.9% 2.7% 2.9% 3.8%
Unemployment Rate 5.5% 5.6% 6.2% 6.0% 5.8% 4.8%
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