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US job growth slows as unemployment edges up


July marked the sixth straight month during which employment expanded by more than 200,000 jobs, a stretch last seen in 1997. Photo: Bloomberg

Washington: US job growth slowed in July and an unexpected rise in the unemployment rate pointed to some slack in the labour market that could give the Federal Reserve room to keep interest rates low for a while.

Nonfarm payrolls increased 209,000 last month after surging by 298,000 in June, the Labour Department said on Friday.

Data for May and June were revised to show a total of 15,000 more jobs created than previously reported, showing underlying momentum and taking some of the sting from the report.
 
US stock index futures pared losses on the report, while the dollar fell to a session low against a basket of currencies. US Treasury debt yields dropped.

"It's a goldilocks report for an economy that is steadily expanding but not lifting off. It will reinforce for now the Federal Reserve's commitment to a gradualist policy approach," said Mohamed El-Erian, chief economic advisor at Allianz in  Newport Beach, California.

July marked the sixth straight month that employment has expanded by more than 200,000 jobs, a stretch last seen in 1997. The one tenth of a percentage point increase in the unemployment rate to 6.2 per cent came as more people entered the labour market, a sign of confidence in employment prospects.

Average hourly earnings, which are being closely monitored as a potential signal of reduced slack that could prompt the Fed to raise rates, rose only one cent.

That left the annual rate of increase at 2.0 per cent, still well below the levels that would make Fed officials nervous. Fed officials on Wednesday cautioned that "significant" slack remained, signaling patience on the rate front.

A separate report from the Commerce Department showed inflation retreating in June. A price index for consumer spending, excluding food and energy, edged up 0.1 per cent after gaining 0.2 per cent in May.
The core personal consumption expenditures price index, which is the Fed's preferred inflation measure, increased 1.5 per cent in the 12 months through June, still below the central bank's two per cent target.
Most economists look for the first interest rate increase in the second quarter of next year. The Fed has kept benchmark interest rates near zero since December 2008.

Still growing
Economists polled by Reuters had expected payrolls to increase 233,000 last month and the unemployment rate to hold steady at 6.1 per cent. The cooling in hiring is unlikely to change perceptions about strong economic growth in the third quarter.

"It still points to a job market and an economy that is improving, but we also have the absence of wage pressures building, which is becoming another concern for investors," said Sean Lynch, managing director of global equity and research strategy at Wells Fargo Private Bank in Omaha, Nebraska.

The economy grew at a 4.0 per cent annual pace in the second quarter after shrinking at a 2.1 per cent rate in the first three months of year. While restocking by businesses lifted the figure, growth is seen remaining sturdy for the rest of 2014. The jobless rate has declined from a peak of 10 per cent in October 2009, but much of the drop has been because Americans have left the workforce.

The labour force participation rate, or the share of working-age Americans who are employed or at least looking for a job, increased to 62.9 per cent in July after holding at 62.8 per cent for three consecutive months.

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