Modest Job Growth in July

By August 4, 2006Economy

Business is UpThe Labor Department reported today that the economy added just 113,000 jobs in July and the unemployment rate rose to 4.8% from 4.6% in June. July was the fourth consecutive month of sub-par job creation. Since March, the economy has created, on average, just 112,000 jobs per-month. This is 34% below the average 169,000 jobs created per-month during the prior 12 months. Over the past 12 months, the economy has created 1.7 million, the smallest 12-month gain in 2 years.

Manufacturing employment fell by 15,000 in July, after rising 22,000 in June. Production employment (jobs on the factory floor most-closely tied with manufacturing output) was up a 10th-consecutive month in July, rising by 1,000. Non-production employment fell by 16,000.

Interestingly, a dichotomy has emerged in manufacturing employment. Over the past 10 months, production employment in manufacturing has risen by 171,000, the best performance in eight years, while non-production employment has fallen by 117,000.

Retail employment was unchanged in July after 3 consecutive monthly declines. In addition, construction employment edged up just 6,000 in July, after 4,000 losses in May and June. Over the past 5 months, construction employment has risen just 1,800 per month. This is much slower than the average rise of 27,000 over the prior months. Today’s report indicates that both housing and consumer spending are continuing to moderate.

Today’s report is a real shot across the bow for the the USS Federal Reserve. High energy prices and a cooling housing market are moderating economic growth. With this in mind, the Fed would be well advised to hold interest rates at their present levels when the federal open market committee meets next week.