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Economy in Brief

U.S. Employment Growth Disappoints; Unemployment Rate Declines
by Tom Moeller  August 2, 2013

Job creation is continuing, but at an uninspiring rate. Nonfarm payrolls rose 162,000 (1.7% y/y) during July following downwardly revised increases of 188,000 and 176,000 during the prior two months. A 183,000 job increase had been expected in the Action Economics survey. A weaker gain in private service sector payrolls highlighted the disappointment. Despite these weak results, the unemployment rate fell to 7.4%, its lowest level since December 2008. A 7.5% rate had been expected.

From the establishment jobs survey, nonfarm payrolls increased 162,000, the weakest gain since March. The loss of momentum was apparent across industries. Factory sector payrolls rose just 6,000 (0.2% y/y) following four consecutive months of decline. Construction sector jobs fell 6,000 (+3.0% y/y) and reversed most of June's gain. Private service sector employment rose 157,000 (2.3% y/y), also its weakest result since March. The 36,000 gain (3.5% y/y) in professional & business services was its smallest since December. Also weakened were leisure & hospitality jobs which increased 23,000 (3.4% y/y), the easiest rise since November. Offsetting these disappointing results was a 63,000 advance (2.0% y/y) in trade, transportation & utilities and a 46,800 increase (2.4% y/y) in retail trade employment. Financial activities jobs gained 15,000 (1.5% y/y) while education & health services employment rose 13,000 (1.7% y/y).

The breadth of job increase amongst private industries slipped m/m to 58.8%, but was down sharply from the 72.2% peak in January of last year. Over three months a reduced 59.8% of private industries added to payrolls. In the factory sector, 46.3% of industries added to employment m/m. That compares to a high of 74.1% in March of last year and over three months the figure was 42.0%.

The length of the average workweek slipped to 34.4 hours, its least in nine months and down from the high of 34.6 this past March. A lessened 40.2 hours were worked in goods producing industries while a shortened 33.2 hours were worked in the private service-producing sector.

Further disappointment in the employment was that average hourly earnings slipped 0.1% (+1.9% y/y) after June's 0.4% rise. A 0.2% gain had been expected. Earnings slipped 0.1% in both goods-producing (1.9% y/y) and private service-producing industries (+1.9% y/y).

The household sector survey indicated that the unemployment rate fell to 7.4%. The decline was due to a 227,000 increase (1.4% y/y) in employment and a 37,000 decline (+0.5% y/y) in the labor force. This fall followed three months of sharp increase. It reflected a slip in the labor force participation rate to 64.4%. That compares to a 67.1% rate from 1997 to 2000. During the last five years the number of working age individuals not in the labor force has grown roughly 2.5% per year. That compares to a roughly 1.0% norm in the late 1990s.

The total unemployment rate, including marginally attached and those involuntarily part-time, fell to 14.0%. The average duration of unemployment ticked up to 36.6 weeks but it remained below the December 2011 high of 40.7 weeks. Still, the figure compared to 16.8 weeks in 2006. For the long-term unemployed, 25.0% of were out 52 weeks or more.

The figures referenced above are available in Haver's USECON database. Additional detail can be found in the LABOR and in the EMPL databases. The expectation figures are from Action Economics and are in the AS1REPNA database.

Employment: (M/M Chg., 000s) Jul Jun May Y/Y 2012 2011 2010
Payroll Employment 162 188 176 1.7% 1.7% 1.2% -0.7%
 Previous -- 195 195 -- 1.4 1.2 -0.7
 Manufacturing 6 -3 -5 0.2 1.7 1.7 -2.7
 Construction -6 8 -1 3.0 2.0 0.3 -8.3
 Private Service Producing 157 188 191 2.3 2.2 1.9 -0.1
 Government 1 -8 -11 -0.2 -0.8 -1.8 -0.3
Average Weekly Hours - Private Sector 34.4 34.5 34.5 34.4
(Jul'12)
34.4 34.4 34.1
Average Private Sector Hourly Earnings (%) -0.1 0.4 0.0 1.9 1.9 2.0 1.8
Unemployment Rate (%) 7.4 7.6 7.6 8.2
(Jul'12)
8.1 8.9 9.6
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