Home > Employment Growth Surprisingly Weak
By Tim Ahmann
WASHINGTON - U.S. employers added a paltry 32,000 workers to payrolls last month, the government said on Friday in a report that was far weaker than expected and unwelcome news for an election-bound President Bush.
The Labor Department also cut its tally of job growth in May and June by a combined 61,000, adding to the report’s weak tenor.
Bond markets surged and the dollar tumbled as the data raised questions about how successfully the economy shook off June weakness and led financial market participants to expect a slower pace of interest-rate rises from the Federal Reserve than had been expected.
In one bright spot, the unemployment rate fell to 5.5 percent last month from 5.6 percent in June as a separate Labor Department survey of households showed robust employment growth. The department cautioned, however, that the household survey was a less reliable barometer of month-to-month changes in employment than its larger survey of businesses.
Wall Street economists polled last week had looked for a payroll gain of 228,000, although a weak employment reading from a service sector survey on Wednesday had some bracing for a weaker number. Still, they were stunned by July’s lackluster figure.
"It’s a huge disappointment, a big surprise," said Scott Brown, chief economist at Raymond James in St. Petersburg, Fla. "It implies a very sharp revision to the overall outlook for the economy."
The Bush administration was likely to look on the positive side as the report showed 1.5 million jobs have been created in 11 straight months of hiring gains.
However, Democratic White House hopeful John Kerry could accurately argue that the economy is still down 1.1 million jobs since Bush took office, despite the recent gains.
Fed officials gather next Tuesday to plot interest rate strategy and had widely been expected to add to a quarter-point interest-rate increase made in June.
Some economists said the Fed would still raise rates next week but may have second thoughts at its next meeting in September, unless it was clear by then that the economy had regained momentum.
"We still think that the Fed will raise rates next week, but the case for moving slowly and deliberately is strengthened by this report," said Patrick Fearon, an economist at A.G. Edwards and Sons in St. Louis.
The government said last week the economy advanced at just a 3 percent annual rate in the second quarter, a sharp slowdown from its heady 4.5 percent first-quarter pace, but fresher data had led many to think the pace of growth quickened last month.
Manufacturers added a meager 10,000 workers in July, after cutting a revised 1,000 from their payrolls in June. The department noted a loss of 21,000 jobs in the transport industry, which it pinned on larger-than-usual retooling shutdowns at auto plants.
Construction firms added just 4,000 new workers.
The service side of the economy showed weakness as well, creating only 14,000 new jobs. Employment at financial firms plummeted, with big losses at mortgage brokers that some economists said could be tied to rising interest rates. (Reuters)