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Economy in Brief

U.S. Payrolls Up, Unemployment Down
by Tom Moeller July 8, 2005

Non-farm payrolls rose 146,000 last month following an upwardly revised 104,000 rise in May. While the latest increase disappointed Consensus expectations for a rise of 183,000, it continued the pace of job growth of roughly 1.5% in place for the last year.

The unemployment rate from the household survey fell to its lowest level since September 2001. At 5.0%, the rate reflected a 165,000 (1.8% y/y) rise in employment and a 1,000 (1.2% y/y) rise in the labor force. The labor force participation rate dipped slightly to 66.0% reflecting an increase in the number of dropouts from the force after two months of decline. Growth in dropouts rose, as a result, to 1.3% y/y though that remained down from the high of 3.7% late in 2003.

Factory sector payrolls fell 24,000 and suffered the worst month of job loss since January, led lower by an 18,000 (-2.6% y/y) worker decline in the motor vehicle industry. A 12,000 (-1.6% y/y) decline in nondurable goods reflected widespread industry declines but were notable at textile mills (-6.1% y/y) and in apparel (-10.5% y/y).

Private service producing industries payrolls rose a firm 148,000 (1.9% y/y) last month led by professional & business services, up 56,000 (3.0% y/y), and education & health services, up 38,000 (2.3% y/y).

Construction jobs rose 18,000 (4.1% y/y) and total government employment rose a modest 2,000 (0.8% y/y). Federal government jobs fell 7,000 (-0.7% y/y) but local gov't employment rose 7,000 (1.0% y/y).

The index of aggregate hours worked (employment times hours worked) rose 0.2% (2.6% y/y) and recovered a revised 0.2% decline in May. The level of hours worked in 2Q rose 2.8% (AR) from 1Q05.

Average hourly earnings rose the same 0.2% as during May and those gains were down from 0.3% during the prior two months.

Employment June May Y/Y 2004 2003 2002
Payroll Employment 146,000 104,000 1.6% 1.1% -0.3% -1.1%
  Manufacturing -24,000 -6,000 -0.5% -1.2% -4.9% -7.2%
Average Weekly Hours 33.7 33.7 33.6 33.7 33.7 33.8
Average Hourly Earnings 0.2% 0.2% 2.7% 2.1% 2.7% 2.9%
Unemployment Rate 5.0% 5.1% 5.6% 5.5% 6.0% 5.8%
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