Another tepid jobs report
By: Patrick Reis
August 2, 2013 08:38 AM EDT
The trend of sluggish economic growth continued Friday, as federal economists reported that the economy added 162,000 jobs in July while the unemployment rate edged down from 7.6 percent to 7.4 percent.
The jobs count, which narrowly missed analyst expectations, follows Wednesday’s dour news that the economy grew by only 1.7 percent in the second quarter. Federal economists also reduced their estimate for first quarter growth down to 1.1 percent.
The 7.4 percent unemployment rate is the lowest of President Barack Obama’s presidency, as the rate dipped to its lowest level since December of 2008.
The unemployment rate is based on a separate survey — one that relies on data from a survey of households — than from the jobs number, which is calculated via a survey of employers’ payrolls. The household survey, which has a larger margin for error than the payroll count, estimated 227,000 more people were employed in July than in the month before.
But the falling unemployment stems from both positive and negative news, as the additional 37,000 people who left the labor force in July also contributed to rate’s decline.
“The report, like many of late, contains good news and less good news,” Jared Bernstein, a senior fellow at the Center for Budget and Policy Priorities and a former economic adviser to Vice President Joe Biden, said in a post on his website. “Most of the decline in unemployment was due to more people getting jobs but part of it was due to a slight fall off in the labor force, a signal of not-too-strong labor demand.”
The stubbornly slow job growth left 11.5 million people unemployed, with another 8.2 million part-time employees unsuccessfully looking to add more hours to their work week. Among the unemployed, 4.2 million have been unsuccessfully seeking work for 6 months or more.
In the past year, the unemployment rate has fallen 0.8 percent with the count of officially unemployed persons falling by 1.2 million.
At this point, the job reports are used as little more than talking points in the fiscal debate between the White House and Republicans, but they are a key indicator for the Federal Reserve as it weighs when it will begin to scale back its efforts to stimulate the stalled economy.
Fed Chairman Ben Bernanke has said the central bank is watching for signs that it should scale back a series of monthly multi-billion dollar asset purchases that are aimed at driving down long-term interest rates and sparking new growth.
Paul Ashworth, chief U.S. economist for Capital Economics, predicted Friday that the report will push the Fed to ramp down its efforts when the bank’s policy committee next convenes in September.
While it may not spur action in Congress, the employment report and GDP data jointly add further urgency to the newly reinvigorated economic debate between President Barack Obama and congressional Republicans.
With budget deadlines approaching, Obama is in the midst of a speaking tour pushing Congress to adopt a series of government programs aimed at promoting the country’s long-term competitiveness while creating jobs in the near term. Republicans argue that the president’s existing programs are the problem, saying the health care reform law and other Obama-backed policies have left businesses afraid to make new hires.
Neither side is giving any ground, and it appears extremely unlikely that the new numbers will push them from their pre-existing positions.
The White House said, as it does each month, that the report is evidence of progress but that more needs to be done.
“With the recovery entering its fifth year, we need to build on the progress we have made so far and now is not the time for Washington to impose self-inflicted wounds,” said Council of Economic Advisers Chairman Alan Krueger, who is leaving the White House Friday to return to teaching at Princeton University. “The across-the-board budget cuts known as the sequester continue to be a drag on the economy now and in the future.”
House Speaker John Boehner Friday again blamed the president’s policies for the slow growth. “Three years after the Obama administration proclaimed ‘welcome to the recovery,’ we’re still seeing the same thing month after month: not enough new jobs and an unemployment rate far higher than promised,” Boehner said in a statement. “Nearly five years of aggressive intervention by Washington - the ‘stimulus’ era of excessive spending, excessive red tape, and abuse by agencies like the IRS – has left our economy treading water with slow growth, high unemployment, and stagnant wages.”
Amid the stalemate, a series of deadlines loom for politicians to reach some sort of fiscal policy accord. Democrats and Republicans will have to strike a budget deal by the end of the fiscal year on Sept. 30 in order to avoid a government shutdown, and later in the fall, Congress will have to agree to raising the federal borrowing limit if the government is to avoid defaulting on its debts.
The Labor Department Friday also revised its June jobs estimate from 195,000 to 188,000 and its May jobs estimate from 195,000 to 176,000.
Average hourly earnings fell by 2 cents in July to $23.98, edging back after a 10 cent increase in June. During the past year, earnings have increased by 1.9 percent.