July Payrolls Up 163,000

But bigger-than-expected increase in jobs is coupled with a rise in the jobless rate, to 8.3%.

Payrolls in the U.S. climbed more than forecast in July, boosted by a pickup in employment at automakers even as the jobless rate unexpectedly rose to a five-month high.

Payrolls increased 163,000 following a revised 64,000 rise in June that was less than initially reported, Labor Department figures showed today in Washington. The median estimate of 89 economists surveyed by Bloomberg News called for a gain of 100,000. Unemployment rose to 8.3 percent.

Uneven hiring may hold back consumer spending, the biggest part of the economy, as a global slowdown and impending U.S. tax changes weigh on businesses. Job cuts at companies from Morgan Stanley to Cisco Systems Inc. mean unemployment may remain elevated, one reason the Federal Reserve this week said it is prepared to take new steps if needed to boost growth.

“Job growth is not enough to make a big dent in the unemployment rate,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said before the report. “It is unrealistic to expect strong gains in consumer spending. Fed officials will wait until they get a better idea of what will happen on the fiscal policy front.”

Estimates in the Bloomberg survey ranged from increases of 50,000 to 165,000 after a previously reported 80,000 gain in June. Revisions to prior reports subtracted a total of 6,000 jobs to payrolls in the previous two months.

Private payrolls, which exclude government agencies, rose 172,000 after a revised gain of 73,000. They were projected to rise by 110,000, the survey showed.

The unemployment rate was forecast to hold at 8.2 percent, according to the survey median. Estimates in the Bloomberg survey ranged from 8.1 percent to 8.3 percent. The report showed more people left the labor force.

Factory payrolls increased by 25,000, more than twice the survey forecast of a 10,000 increase and boosted by a 12,800 pickup in employment at makers of motor vehicles and parts.

The figures may have reflected fewer shutdowns at automakers for annual retooling related to the new model year, indicating the jump will be reversed this month. Chrysler Group LLC and Ford Motor Co. are among companies that said they would idle fewer plants.

Demand for so-called big-ticket items like automobiles may be cooling. Car and light trucks sold at a 14.1 million annual rate in July, down from a revised 14.3 million in June and indicating little momentum as the industry heads for the best year since 2007, according to Ward’s Automotive Group.

 

‘Soft’ Fundamentals

“Economic fundamentals have remained soft,” Jenny Lin, Ford’s senior U.S. economist, said on an Aug. 1 conference call with analysts. “Job growth as measured by non-farm payroll is modest.”

Employment at private service-providers increased 148,000, the most in five months and reflecting more jobs in education and health services. Construction companies cut payrolls by 1,000 workers and retailers added 6,700 employees.

Government payrolls decreased by 9,000 for a second month.

Average hourly earnings rose by 2 cents to $23.52 in July, today’s report showed.

The average work week for all workers held at 34.5 hours.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 15 percent from 14.9 percent.

The jobless rate, derived from a separate survey of households, has exceeded 8 percent since February 2009, the longest stretch in monthly records going back to 1948.

Fed officials, after meeting this week, left unchanged their statement that economic conditions would likely warrant holding the benchmark interest rate target near zero at least through late 2014. They said unemployment “remains elevated.”

Policy makers “will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” the Fed statement said. Economic growth is expected to “remain moderate over coming quarters and then to pick up very gradually.”

Monthly payroll growth of about 100,000 is needed to keep the jobless rate stable, while growth of roughly 150,000 to 200,000 is needed to lower unemployment, Fed Chairman Ben S. Bernanke said at a news conference in April, citing a “very rough estimate.”

Through June, the U.S. had recovered about 3.8 million of the 8.8 million jobs lost as a result of the 18-month recession that ended in June 2009.

 

Temporary Help

Charlie Jones, a resident of in Washington D.C., who has been out of work for more than a year, says he is relying on food stamps for meals while his girlfriend pays the rent. He signed up with a temporary agency for jobs in office installation and is searching actively for other openings.

“It’s a very tough job market,” said Jones, 35. “It’s discouraging. I keep waiting but they haven’t called me in a long time. I have a friend like me who recently got work, so I think hopefully something should turn up for me.”

Employment and the economy are central themes in the presidential campaign, with President Barack Obama and Republican challenger Mitt Romney debating whose policies would best boost the expansion.

Gross domestic product grew at 1.5 percent annual rate in the second quarter after a 2 percent gain in the first three months of the year, according to figures from the Commerce Department. Household purchases, which account for about 70 percent of GDP, grew at the slowest pace in a year.

Cisco Systems, the biggest maker of computer-networking equipment, plans to eliminate about 1,300 jobs, or 2 percent of the workforce, as Europe’s debt crisis and sluggish corporate spending threaten sales.

Financial firms are also trimming jobs as revenue softens. Morgan Stanley said its headcount will drop by about 700 in the second half, bringing total 2012 reductions to 4,000. Credit Suisse Group AG will eliminate 138 positions in New York starting this month. Deutsche Bank AG will cut about 1,900 jobs by year-end, mostly outside Germany. The lender is also shrinking compensation and benefits.

The so-called fiscal cliff, in which taxes will rise and government agencies will reduce spending next year if Congress doesn’t act, raises the risk of more cutbacks. Lockheed Martin Corp., the world’s largest defense contractor, may have to dismiss about 10,000 of its 120,000 employees if lawmakers don’t act before $1.2 trillion in across-the-board cuts to federal spending, according to Robert Stevens, the Bethesda, Maryland-based company’s chief executive officer.

The Labor Department, in guidance posted on its website, said it would be “inappropriate” for defense companies to send 60-day notices to employees given the uncertainty about whether the reductions will occur or which jobs will be cut.

Honda Motor Co. is among companies looking to expand. The Tokyo-based auto maker, which relies on U.S. vehicle sales for more than half its profit, said it is investing $40 million at its Greensburg, Indiana, plant that produces the Civic compact and will hire 300 workers later this year.

 

Bloomberg News


 

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