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Economy in Brief

U.S. Payrolls Improve
by Tom Moeller August 5, 2005

In July, non-farm payrolls outpaced Consensus expectations for a 180,000 rise and increased 207,000 while the June and the May increases were revised up to 166,000 and 126,000, respectively.

While showing improvement, these monthly increases which average 166,000 are down from the first four months of 2005 when payrolls rose an average 210,000.

Factory sector payrolls continued to decline in July, down 4,000, and the rate of decline has been steady. During the last three months factory payrolls fell an average 8,000 per month versus a 9,000 average during the first four months of 2005. Recent declines in motor vehicle industry payrolls mask some improvement in hiring elsewhere. Auto industry payrolls fell a sharp 10,700 in July following a steep 16,800 June drop but jobs in the machinery (+1.4% YTD) and in the computer & electronics industries (+0.9% YTD) have been rising. The diffusion index measuring one month change in factory payrolls rose to 53.6, the first month above 50 in one year.

Private service producing industries payrolls advanced 177,000 (1.3% YTD) last month following an upwardly revised 166,000 June gain. Professional & business services jobs gained 33,000 (1.6% YTD), education & health services rose 21,000 (1.2% YTD) and financial jobs rose 21,000 (1.2% YTD).

Construction jobs increased 7,000 (2.1% YTD) and total government employment rose 26,000 (0.4% YTD).

The unemployment rate from the household survey remained at a low 5.0% reflecting a 438,000 (1.4% YTD) rise in employment and a 450,000 (0.9% YTD) rise in the labor force. The labor force participation rate ticked up to 66.1% as the number of dropouts from the force reversed most of the increase in June.

The index of aggregate hours worked (employment times hours worked) rose 0.2% (1.5% YTD) and began the third quarter 0.3% above the second. Hours worked in 2Q increased 2.8% (AR) from 1Q05.

Average hourly earnings rose a firm 0.4% following two months of 0.2% increase.

Age and Education Effects on the Unemployment Rate from the Federal Reserve Bank of San Francisco is available here.

Payroll Employment Data: Measuring the Effects of Annual Benchmark Revisions from the Federal Reserve Bank of Atlanta can be found here.

Employment July June Y/Y 2004 2003 2002
Payroll Employment 207,000 166,000 1.7% 1.1% -0.3% -1.1%
  Manufacturing -4,000 -21,000 -0.5% -1.2% -4.9% -7.2%
Average Weekly Hours 33.7 33.7 33.7 33.7 33.7 33.8
Average Hourly Earnings 0.4% 0.2% 2.7% 2.1% 2.7% 2.9%
Unemployment Rate 5.0% 5.0% 5.5% 5.5% 6.0% 5.8%
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