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Economy in Brief

U.S. Payrolls Down, Jobless Rate Up
by Tom Moeller August 1, 2008

Nonfarm payrolls fell 51,000 last month after a revised decline of 51,000 during June, according to the Bureau of Labor Statistics. The latest decline was less than expectations for a 75,000 drop but payrolls have declined in each month of this year. The total drop so far in 2008 amounts to 463,000 jobs and during the last three months payrolls fell at a 0.4% annual rate. That compared to a rate of decline in excess of 2.0% by the end of the last recession.

Weakness in the latest jobs report reflects the effect of recent floods in the Midwest region of the country.

Factory sector jobs fell 35,000, the same as during June, and at a 2.7% rate over the last three months. That was improved from the fastest rate of decline (-4.2%) this cycle and it was slower than during the 2001 recession employment when jobs dropped at a 10% rate.

Construction sector employment dropped 22,000 last month, half the June decline, and at a 5.9% rate during the last three months.

Hiring in the service sector fell 5,000 and rose at a rate of just 0.1% in the last three months. That negligible rate of increase has been stable since March and compares to a 1.6% rise last year.

Government sector jobs continued to rise, last month by 25,000, after firmer gains in May and June. They've increased at a 2.2% rate during the last three months. Federal government hiring rose at a 0.7% rate during the last three months while state as well as local government hiring rose at a 2.2% and a 2.4% rate, respectively.

Private service sector jobs continued to weaken as indicated by a 76,000 decline last month which followed a 94,000 June drop. It was the eighth consecutive monthly decline and the three-month rate of job loss was -0.9% during that period. Retail sector job loss continued at a 1.2% rate during the last three months, though that was eased from the 3.0% rate this past April. Motor vehicle & parts dealers jobs fell at a 4.7% rate. Jobs in the information sector fell 13,000 last month and at a 3.2% rate during the last three. Professional & business services sector have fallen at a 2.5%.

These declines have been offset by 7.5% three-month growth in the number of jobs in education and by 2.6% growth health care jobs. The number of finance sector jobs were unchanged last month but they're down at a 0.8% rate during the last three. Temporary help services jobs, often a leading indicator of employment growth, fell 29,000 last month and at a 14.8% rate during the last three. Real estate sector jobs have been falling at a 0.7% annual rate during the last three months which is an improvement from the 3% to 4% rates of job loss late last year and early this year.

The one month diffusion index, which measures the breadth of job gain or loss (50 is the break-even level), dropped to a new low for this cycle and stood at 41.2%. The three- month index also reached a new low of 40.0%. The three-month figure for the factory sector was weaker at 32.1%.

The Bureau of Labor Statistics household sector survey indicated that the unemployment rate rose to 5.7% in July versus expectations for a 5.6% rate. That was the highest level since January of 2004 as employment fell another 72,000 (-0.2% y/y) after the 155,000 June decline. The level of the unemployed rose 285,000 (23.1% y/y) after a 12,000 rise during June.

The labor force reversed the June decline and rose 213,000 (0.9% y/y) last month. The labor force participation rate was stable m/m at 66.1%, 66.0% during all of last year and 66.2% in 2006. The participation rate amongst adult men was 75.9%, the same as averaged last year, and amongst adult women it was 60.8% versus 60.6% averaged during 2007.

The average duration of unemployment slipped m/m to 17.1 weeks but that was still up from 16.9% weeks averaged during the last two years.

Average hourly earnings increased 0.3%, the same as during the prior two months, but three-month growth rose slightly to 3.9% after 4.0% growth during 2006 and 2007. Factory sector earnings rose 1.8% during the last three months, the weakest rate of gain since last summer, while private service sector earnings rose at a 0.5% rate.

Employment: 000s July June May Y/Y 2007 2006 2005
Payroll Employment -51 -51 -47 -0.0% 1.1% 1.8% 1.7%
      Previous -- -62 -62 -- 1.3% 1.9% 1.7%
  Manufacturing -35 -35 -21 -2.8% -1.9% -0.5% -0.6%
  Construction -22 -49 -38 -6.0% -1.0% 4.9% 5.2%
Average Weekly Hours 33.6 33.7 33.7 33.8 (July '07) 33.8 33.9 33.8
Average Hourly Earnings 0.3% 0.3% 0.3% 3.4% 4.0% 3.9% 2.7%
Unemployment Rate 5.7% 5.5% 5.5% 4.7% (July '07) 4.6% 4.6% 5.1%
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