Employers added fewer workers than anticipated in July and the U.S. jobless rate dropped to 7.4%, indicating uneven progress in the labor market.
The 162,000 increase in payrolls last month was the smallest in four months and followed a revised 188,000 rise in June that was less than initially estimated, Labor Department figures showed today in Washington. The median forecast of 93 economists surveyed by Bloomberg called for a 185,000 gain. Workers spent fewer hours on the job and hourly earnings fell for the first time since October.
The slower pace of hiring suggests some employers are confident they’re able to meet demand with current staffing levels as the economy begins to emerge from a first-half slowdown. At the same time, improving consumer confidence and auto sales have encouraged other companies such as Amazon.com Inc. and Ford Motor Co. to take on more workers.
“This isn’t a disaster of a report but it shows the U.S. remains vulnerable to a slower economic growth performance,” said Julia Coronado, chief economist for North America at BNP Paribas in New York, who had projected payrolls would rise by 165,000. “This isn’t the kind of progress the Fed would like to see. At the margin, it keeps them cautious.”
Stock-index futures erased gains after the report. The contract on the Standard & Poor’s 500 Index expiring in September fell 0.1% to 1,698.9 at 8:48 a.m. in New York.
Retailers added almost 47,000 workers in July, the most in eight months. Employment in education and health services showed the smallest gain in a year. Construction employment fell and manufacturing rose for the first time in five months.
Bloomberg survey estimates for total payrolls ranged from increases of 23,000 to 225,000. Revisions to prior reports subtracted a total of 26,000 jobs from overall payrolls in the previous two months.
Private employment, which exclude government agencies, rose to 161,000 after a revised gain of 196,000. They were projected to rise by 195,000, the survey showed.
The unemployment rate was forecast to drop to 7.5% from 7.6%, according to the Bloomberg survey median.
The labor force as a share of the population dropped to 63.4% from 63.5%.
Average hourly earnings fell 0.1% to $23.98 in July from the prior month, and were up 1.9% over the past 12 months.
The average work week for all workers fell to 34.4 hours from 34.5 hours.
The household survey showed that part-time employment climbed by 174,000 in July, exceeding a 92,000 gain in full-time hiring.
The number of discouraged workers, those not looking for a job because they don’t believe one is available, climbed to 988,000 in July from 852,000 a year ago.
Improving prospects for the economy in the second half of the year may sustain the job market. Economists surveyed by Bloomberg from July 5 to July 10 project growth will average 2.5% during the period, according to the median.
Gross domestic product, the value of all goods and services produced, grew at a 1.7% annualized rate in the April through June period after a 1.1% advance in the prior three months, Commerce Department data showed on July 31.
Amazon.com, the world’s biggest Web retailer, announced in July it is adding more than 5,000 full-time jobs at U.S. warehouses to meet demand. The Seattle-based company also is hiring 2,000 customer-service staff, including part-time and seasonal workers.
Ford, the second-largest U.S. automaker, reported second- quarter per-share profit excluding some items that beat the average estimate of analysts surveyed by Bloomberg. The Dearborn, Michigan-based company said it’ll hire 3,000 salaried employees this year, 800 more than originally planned.
“The automotive sector of our economy has now contributed greatly to overall growth during this expansion,” Ellen Hughes- Cromwick, chief economist at Ford, said on a conference call yesterday. “Job and income gains are positive and interest rates remained relatively low.”
Households continue to keep spending on big-ticket items such as automobiles. Cars and light trucks sold at a 15.6 million annualized rate in July and 15.9 million the prior month, the strongest back-to-back readings since late 2007, according to figures yesterday from Ward’s Automotive Group.
Sustained gains in employment help explain recent increases in consumer sentiment. The Bloomberg Consumer Comfort Index rose last week to the strongest reading since January 2008.
The Institute for Supply Management’s factory index, released yesterday, showed manufacturing expanded in July at the fastest pace in more than two years, sparked by surges in orders and production that signal companies are growing more optimistic about the economic outlook.
The Fed may begin tapering the pace of its asset purchases in September, according to a growing number of economists surveyed by Bloomberg from July 18 to July 22.
“Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated,” policy makers said in their statement this week at the conclusion of a two-day meeting in Washington. The Federal Open Market Committee also said it will maintain its $85 billion in monthly bond buying. “Economic growth will pick up from its recent pace and the unemployment rate will gradually decline.”