US jobless rate falls to 7.4% in July

WASHINGTON DC, United States (2nd UPDATE) – The US unemployment rate fell to a better-than-expected 7.4 percent in July but jobs growth slowed sharply, official data released Friday showed.

The Labor Department said the United States added 162,000 jobs last month, well below the 175,000 expected on average by analysts.

The decline in the jobless rate from 7.6 percent in June was twice as big as the anticipated one-tenth point drop, but that was partly due to a small decline in the number of people active in the labor force.

At 7.4 percent, the jobless rate is the lowest since December 2008, when it was 7.3 percent.

That is markedly better than in July 2012, when the jobless rate stood at 8.2 percent.

The improvement in the unemployment rate increased the chances the Federal Reserve will begin to taper its bond-buying program in September, analysts said.

“The Fed is on track to hit its 7.2-to-7.3 percent Q4 unemployment rate target, and that probably matters more to FOMC members — especially the hawks and near-hawks — than the tiny slowing in payroll growth,” said Ian Shepherdson of Pantheon Macroeconomics.

“We expect a robust August employment report, and think September tapering is a 70/30 bet.”

Private sector employers appeared cautious about expanding their payrolls amid tepid growth in the economy.

The private sector added 161,000 jobs in July, down from a downwardly revised 196,000 in June.

The sector had been expected to add 195,000 jobs after the prior estimate of 202,000.

Most of the gains were in retail trade, food services and bars, financial activities and wholesale trade.

The government, which has been shedding jobs for months under tighter budgets, added 1,000 jobs.

Prior months’ jobs growth was revised lower by 26,000 jobs.

The June figure was revised to 188,000 jobs from 195,000, and the May reading was revised to 176,000 from 195,000.

The average pace of jobs growth over the last three months was 175,000.

The number of officially unemployed fell by 263,000 to 11.5 million, while 240,000 people dropped out of the labor market.

The number of people employed part-time for economic reasons — because their hours were cut back or they could not find a full-time job — rose by 19,000 to 8.2 million.

The long-term unemployed — those out of work at least 27 weeks — fell by 82,000 to 4.2 million.

In the private sector, the average workweek shrank slightly and hourly earnings fell two cents.

“The establishment (unemployment) survey fell short of expectations — including hours and earnings as well as payrolls — although through the volatility the trends still look solid,” said Jim O’Sullivan, chief US economist at High Frequency Economics.

“The trend in employment growth still looks more than strong enough to keep unemployment trending down.” – Rappler.com