Payroll growth slows dramatically in July
Tuesday, August 3rd 2004, 9:16 am
By: News On 6
WASHINGTON (AP) _The nation's payroll growth slowed dramatically in July with a paltry 32,000 jobs being added_ a potentially troubling sign that the rough patch the economy hit in June was no aberration.
The unemployment rate, however, dipped down a notch to 5.5 percent last month, from 5.6 percent in June, the Labor Department reported Friday. The new jobless rate was the lowest since October 2001.
The payrolls figure and the unemployment rate can sometimes go in different directions because they are derived from two separate statistical surveys.
Economists, however, look more closely at the payroll figure as a better barometer of the health of the jobs market. The 32,000 net jobs added in July represented the smallest gain in hiring since December and followed a revised gain of just 78,000 in June, even less than previously reported. May's payrolls also were revised down to show a gain of 208,000.
``Employers got cold feet,'' said economist Ken Mayland, president of ClearView Economics. ``Employers just don't have the confidence in the economy that we need to sustain the kind of economic growth that we've seen.''
Soaring energy costs, which have hit companies bottom lines', also may have played a factor in businesses being more cautious in their hiring, economists said.
Even against the backdrop of the lower-than-expected payroll number, analysts are still predicting the Federal Reserve will boost interest rates at its next meeting on Tuesday. But if other economic data suggest the economy is cooling in the current quarter, that would make it less likely there would be further rate increases this year, analysts said.
On Wall Street, stocks fell. The Dow Jones industrials lost 92 points and the Nasdaq was down 26 in morning trading.
The unemployment rate is calculated based on a survey of around 60,000 households _ a sort of poll _ in which people are asked to state whether they have jobs or are looking for work. The seasonally adjusted civilian unemployment rate thus is the percentage of the labor force represented by those who are either listed as officially unemployed or searching for work.
The survey used to calculate the payroll figure is based on information from about 160,000 businesses and government agencies, covering roughly 400,000 individual worksites.
Analysts were expecting the economy to add anywhere from 215,000 to 247,000 jobs in July. They were predicting the jobless rate to hold steady at 5.6 percent.
Federal Reserve Chairman Alan Greenspan, appearing before Congress last month, said that the economy hit a ``soft patch'' in June. But he expressed confidence that it would be short-lived.
President Bush and his Democratic rival, John Kerry, joust frequently over the health of the economy and the availability of jobs _ prominent issues in the presidential campaign. Kerry says Bush's economic policies aren't working and squeeze the middle class. Bush insists his tax cuts have helped the economy rebound and that making those tax cuts permanent will spur more job creation. He's counting on that to help him win another four-year term in November.
Since Bush took office in January 2001, the economy has lost a net 1.1 million jobs. ``Economic growth is strong and getting stronger,'' he told a conference of minority journalists Friday.
Kerry, reacting to the employment report, said: ``The president keeps saying we've turned the corner. But unfortunately, today's job numbers further demonstrate that our economy may be taking a U-turn instead.''
While the economic recovery is on a solid path, the labor market recovery has been spotty.
Greenspan, in his appearance before Congress last month, noted that businesses have not completely abandoned their cautionary stance toward hiring.
Still, with the job situation uneven, Federal Reserve policy-makers have leeway to raise short-term interest rates gradually to head off any inflation problems, economists said. Economists expect policy-makers to boost rates by one-quarter percentage point next week. On June 30, the Fed increased interest rates for the first time in four years, raising a key rate to 1.25 percent from a 46-year low of 1 percent.
Even with the disappointing job growth in July, it still marked the 11th month in a row that the economy added jobs.
And, in an encouraging note, manufacturers, after cutting 1,000 jobs in June, added 10,000 in July. Education and health services also expanded employment. But retailers shed jobs as did financial services firms and hospitality companies.
Separately, consumer confidence surged in August to its highest level since the beginning of the year despite fresh terror threats and surging oil prices.
The AP-Ipsos consumer confidence index climbed to 104.8 in August, up from 92.0 in July, led by consumers' perceptions of their own finances and optimism about the future.