The economy continued to advance at a sturdy pace in July, the government reported Friday, creating 209,000 jobs and adding to a string of generally positive economic reports in recent weeks pointing to an improved outlook after years of lackluster post-recession growth.þþAt the same time, last month’s job gains were lower than in recent months and less than Wall Street had expected, helping to calm fears that the economy was about to accelerate to a point where the Federal Reserve might decide to start raising interest rates earlier than anticipated.þþ“This report is consistent with a moderation in economic growth in the second half of the year,” said Dean Maki, chief United States economist at Barclays. “This is a labor market that is growing solidly, just not quite as fast as in prior months.”þþThe new numbers signaled the sixth straight month in a row of job gains of more than 200,000, the healthiest pace of job creation over that length of time since 2006.þþThe Labor Department also said Friday that unemployment increased to 6.2 percent. Many economists viewed the slight rise in unemployment as a modestly encouraging sign, in part because more people reported that they were looking for work., suggesting that many of them were starting to see greater job opportunities.þþOn Wall Street, stocks fell for the second day in a row, though not as steeply as on Thursday, while the bond market improved slightly as interest rates softened.þþThe latest economic data eases the pressure on the Federal Reserve to retreat more quickly from its stimulus campaign. The Fed’s chairwoman, Janet L. Yellen, and her allies argued in recent months that the declining unemployment rate overstated the economy’s progress, because more people would start looking for work as the recovery continued. The uptick in the unemployment rate in July lends credence to that view.þþInflation also remained sluggish. The Fed’s preferred measure, which the government also updated Friday, rose just 1.6 percent over the 12 months ending in June, remaining below the central bank’s preferred pace of 2 percent a year.þþThe Fed affirmed Wednesday, in a statement released after the most recent meeting of its policy-making committee, that it planned to keep interest rates low as long as unemployment remained elevated and inflation remained under control.þþThe sole dissenter, Charles Plosser, president of the Federal Reserve Bank of Philadelphia, said Friday that the Fed still should be moving more quickly toward raising rates. In a statement explaining his decision, he noted that inflation increased over the last year, while unemployment declined, so conditions were moving closer to the Fed’s stated goals.þþOn the jobs numbers, the consensus among economists was an expectation of about 230,000 new jobs. The July figure was well below the revised 298,000 surge reported in June. So far this year an average of 229,000 new jobs a month have been created. That’s a significantly higher pace than in 2010 when a mere 88,000 jobs a month on average were added.þþThe report was confirmation that a gradual healing of the job market remained on track, even as it underscored just how slow the improvement had been. It showed, for example, that over the last year employers added 2.57 million jobs, which is the steepest rate of job creation for any 12-month period in the five-year expansion. But the proportion of the country’s population that reported having a job in July was unchanged at 59 percent, a number that was up only barely from its 58.7 percent level of a year ago.þþ“This is another solid report that shows we are sustaining the momentum of broad-based growth in the economy,” said Thomas E. Perez, the Labor Secretary, in a telephone interview. He also cited the growth in well-paying professional and business services jobs as evidence that gains were spreading more widely.þþGeneral optimism about the economy was supported on Wednesday when the Commerce Department, in its initial estimate of the economy’s overall output for April, May and June, reported that the gross domestic product grew at a seasonally adjusted annual rate of 4 percent for the quarter, surpassing expectations, rebounding from a 2.1 percent decline during the harsh winter quarter.þþAdding to the more upbeat view was a report from the Institute for Supply Management showing its manufacturing index rose to 57.1 in July, up from 55.3 in June and the highest reading in three years. The reading was bolstered by improvements in the index of new orders, production, employment and supplier deliveries. The University of Michigan consumer sentiment index rose to 81.8 in the last July reading, up from the initial July reading of 81.3. The index was on track with moderate consumer spending growth.þþBut Friday’s data from the Labor Department showed that in July wages barely moved, inching up by just a penny and leaving them only 2 percent higher than a year ago, a rate that barely outpaced inflation.þþ“People’s standards of living are still stuck in the mud,” said Mark Zandi, chief economist at Moody’s Economics, who called the government’s report otherwise “close to perfect” because job growth increased across nearly all industries and all pay scales.þþThe news that wages remained flat contrasted with a report Thursday that American labor costs recorded their biggest gain since the third quarter of 2008. The Employment Cost Index report found that labor costs jumped 0.7 percent, up sharply from the 0.3 percent rate for the first quarter. The 0.5 percent average for the first half, though, was not far from the underlying trend over the previous year.þþFriday’s Labor Department report seemed to seal the notion that the economy had yet to burst free of its straitjacket.þþThe labor force participation rate rose slightly in July to 62.9 percent. But Joshua Shapiro, chief United States economist for MFR, said in a note to clients that the historically low rate of participation was still troubling because some of the youngest workers were dropping out of the job force.þþ“The participation rate is at lows not seen since 1978,” Mr. Shapiro said, “and therefore conditions in the labor market are certainly worse than indicated by the reported steep drop we have been seeing in the unemployment rate.”þþThe numbers reported Friday showed that retail employment figures were higher for July, up by 27,000 jobs, and for the two previous months after revisions. Jack Kleinhenz, chief economist for the National Retail Federation, said the news was encouraging but that “no one can guarantee smooth sailing,” adding that “choppy growth among business lines will continue.”þþManufacturing added 28,000 jobs last month but the Alliance for American Manufacturing said the sector has recovered only 30 percent of the jobs lost during the recession. “There are many obstacles that stand in the way of a true resurgence: a paucity of investment in our infrastructure, high trade deficits and currency manipulation by countries like China and Japan,” the alliance said in a news release.þ
Source: NY Times
