Payrolls Growing as More Americans Search for Work: Economy
The U.S. economy added more than 200,000 jobs for a sixth straight month, showing progress toward sustaining faster growth entering the sixth year of expansion. The improving conditions drew more job seekers into the labor force, pushing up the unemployment rate.
The 209,000 advance in employment in July followed a 298,000 June increase that was stronger than initially reported, figures from the Labor Department showed today in Washington. Unemployment climbed to 6.2 percent from 6.1 percent, while wages and hours were little changed from the prior month.
The degree of hiring this year may help trigger a self-reinforcing cycle of better spending and job opportunities that will spur the economy. Another report today showed manufacturing expanded last month at the fastest pace in more than three years, led by a surge in orders.
The job market “does look to be on a healthy growth track right now,” said Alan Blinder, former vice chairman of the Federal Reserve and an economics professor at Princeton University in New Jersey. “It means less social distress from unemployment (USURTOT) and an inability to find jobs. Secondly, it means more spendable income for the U.S. workforce.”
The Standard & Poor’s 500 Index fell for a second day as concerns over Argentina and Portugal overshadowed the jobs data. The S&P 500 declined 0.3 percent to 1,925.15 at the close in New York.
Treasuries rose, sending the yield on the benchmark 10-year note down to 2.50 percent from 2.56 late yesterday, as the increase in unemployment and subdued wage gains damped bets the Fed will move faster to reduce monetary stimulus.
The Institute for Supply Management’s factory index increased to 57.1, the highest since April 2011, from 55.3 a month earlier, the Tempe, Arizona-based group reported today. Readings above 50 indicate growth.
Orders and production expanded last month at the fastest pace of the year as factories responded to increased purchases of automobiles and business equipment. The purchasers’ employment gauge climbed to the highest level in three years.
“This is clearly a nice bump,” Bradley Holcomb, the ISM survey chairman, said on a conference call with reporters. “It’s representative of the new orders stream that keeps coming in, and anticipation of more of the same as we go forward.”
Manufacturing was also strengthening elsewhere. China’s factories expanded in July at the fastest pace in more than two years, another report showed. In the U.K., manufacturing grew last month at the slowest pace in a year as cooling orders and output ended the first half’s “stellar growth spurt,” according to a report from Markit Economics.
Strong sport-utility vehicle demand sent Ford Motor Co.’s U.S. sales up 9.5 percent in July, exceeding analyst estimates as the industry’s deliveries headed toward the best year since 2006. Motor vehicle sales last month cooled to a 16.4 million annualized rate from an eight-year high of 16.9 million in June, according to data from Ward’s Automotive Group.
The increase in U.S. July payrolls fell short of the 230,000 projected by the median forecast of 88 economists surveyed by Bloomberg. Estimates ranged from gains of 160,000 to 310,000. Revisions added 15,000 jobs to the June and May totals. The last time payrolls grew by 200,000 or more for at least six months in a row was in 1997.
“The good news is the economy clearly is getting stronger,” President Barack Obama said at a press conference at the White House. “Our engines are revving a little bit louder. And the decisions that we make right now can sustain and keep that growth and momentum growing.”
Construction companies and factories were among those that added more to payrolls in July than a month earlier. Employment gains cooled at retailers, business services and education and health services.
Dennis Haffner, 47, started a new job this week after 11 months of unemployment. He had $6.42 in his savings account and was staring down having to move in with his parents.
“This is what I’ve been looking for,” said Haffner, who lives in Manchester, Connecticut, and will be working in business process improvement at an insurance company. “Things fell into place.”
He was seeing more employment opportunities toward the end of his search than at the start, he said.
“There was a lot of discouragement throughout the whole process,” he said. “Things didn’t really start to happen until the end of January, beginning of February, and then I saw an abundance.”
The jobless rate, calculated from a separate survey of households, climbed as 329,000 people joined the workforce, swamping the 131,000 increase in employment. The so-called participation rate, which indicates the share of working-age people in the labor force, increased to 62.9 percent from 62.8 percent in June, which matched the lowest since March 1978.
“Don’t even talk to us about mass unemployment out there, and discouraged people dropping out of the labor force,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said in a research note. “This economy is strong.”
Another report today showed consumer spending rose in June by the most in three months, ending the quarter on a strong note and signaling that job growth will bolster the world’s largest economy, according to Commerce Department figures.
The sustained gains in hiring “actually put some upside risk to consumption-growth outlook,” said Laura Rosner, a U.S. economist at BNP Paribas in New York. “The continuation of solid hiring is definitely a positive signal for the economy.”
Economists surveyed by Bloomberg from July 3 to July 9 see the U.S. economy adding 215,000 jobs on average per month this year. That would be the fastest pace of job growth since 1999, when the economy gained 265,000 jobs per month on average.
While the economy is creating more jobs, wage growth has lagged behind, increasingly becoming a focal point for central bank policy makers. Fed Chair Janet Yellen told lawmakers last month that while her view of the economy has turned “more positive,” she’s concerned about low participation in the labor force and sluggish wage growth.
Today’s report showed average hourly earnings were little changed at $24.45 in July. They were up 2 percent over the past 12 months. The underemployment rate -- which includes part-time workers who’d prefer a full-time position and people who want to work but have given up looking -- rose to 12.2 percent from 12.1 percent.
Federal Open Market Committee officials this week continued to pare monthly asset purchases as the job market strengthens and the threat of disinflation diminishes. Nonetheless, they said in a statement that “a range of labor-market indicators” has showed “significant underutilization of labor resources.”
Growing demand could cut into remaining slack.
Gross domestic product rose at a 4 percent annualized rate in the second quarter after shrinking 2.1 percent from January through March, Commerce Department figures showed this week. Gains in consumer spending and business investment spurred the rebound.
The jobs report “supports the case for continued economic growth, and continued growth in consumer spending, as well as an acceleration of both,” said Robert Stein, deputy chief economist at First Trust Portfolios LP in Wheaton, Illinois, and the top payroll forecaster over the past two years in data compiled by Bloomberg.
Strong demand for cars is one reason New York-based aluminum maker Alcoa Inc. is hiring. A $300 million expansion at Alcoa Davenport, Iowa, facility led to 150 new full-time jobs, said Rob Woodall, manufacturing director at the plant.
“This is following the growth in automotive, but this is also because of an expansion of the use of aluminum in automotive,” Woodall said during an interview at the facility, which boasts the world’s largest aluminum rolling mill.
“We’re continuing hiring” past the initial 150 as Alcoa’s workforce ages and demand strengthens, Woodall said. Alcoa is also adding automotive capacity in Alcoa, Tennessee. “This isn’t the only place we’re adding jobs.”
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