U.S. unemployment rate declines to 7.4 percent
WASHINGTON – U.S. employers added 162,000 jobs in July, a modest increase and the fewest since March. At the same time, the unemployment rate fell to a 4 1/2-year low of 7.4 percent, a hopeful sign.
Unemployment declined from 7.6 percent in June because more Americans found jobs, and others stopped looking and were no longer counted as unemployed.
Still, Friday’s report from the Labor Department pointed to a less-than-robust job market. It suggested that the economy’s subpar growth and modest consumer spending are making many businesses cautious about hiring.
The government said employers added a combined 26,000 fewer jobs in May and June than it previously estimated. Americans worked fewer hours in July, and their average pay dipped. And many of the jobs employers added last month were for lower-paying work at stores, bars and restaurants.
For the year, job growth has remained steady. The economy has added an average 200,000 jobs a month since January, though the pace has slowed in the past three months to 175,000.
Nariman Behravesh, chief economist at IHS Global Insight, called the employment report “slightly negative,” in part because job growth for May and June was revised down.
The Federal Reserve will review the July employment data in deciding whether to slow its $85 billion a month in bond purchases in September, as many economists have predicted. Weaker hiring could make the Fed hold off on any pullback in its bond buying, which has helped keep long-term borrowing costs down.
Beth Ann Bovino, senior economist at Standard & Poor’s, said she thinks Friday’s report will make the Fed delay a slowdown in bond buying.
“September seems very unlikely now,” she says. “I’m wondering if December is still in the cards.”
Still, the lower unemployment rate, along with the hiring gains over the past year, could convince the Fed that the job market is strengthening consistently.
“While July itself was a bit disappointing, the Fed will be looking at the cumulative improvement,” said Paul Ashworth, chief U.S. economist at Capital Economics. “On that score, the unemployment rate has fallen from 8.1 percent last August to 7.4 percent this July, which is a significant improvement.”
The government uses a survey of mostly large businesses and government agencies to determine how many jobs are added or lost each month. That’s the survey that produced the gain of 162,000 jobs for July.
It uses a separate survey of households to calculate the unemployment rate. That survey captures hiring by companies of all sizes, including small businesses, new companies, farm workers and the self-employed.
The household survey found that 227,000 more people said they were employed last month. And 37,000 people stopped looking for work and were no longer counted as unemployed.
The number of self-employed jumped 241,000, or 2.6 percent, to 9.7 million, the most in eight months.
Combined, those factors explain why the unemployment rate declined from 7.6 percent to 7.4 percent.
Low-paying industries have accounted for 61 percent of jobs added this year, even though they represent only 39 percent of U.S. jobs overall, according to Labor Department numbers analyzed by Moody’s Analytics.
Job gains are being slowed by the economy’s tepid growth. It grew at an annual rate of just 1.7 percent in the April-June quarter, an improvement over the previous two quarters but too weak to rapidly lower unemployment.
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