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July Jobs Report Shows Unemployment Fall To 3.9 Percent As Hiring Slows

August 03, 2018 - 3:05 pm
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NEW YORK (WCBS 880/AP) -- The July jobs report showed that employers pulled back on hiring, but the job gains were still enough to lower the U.S. unemployment rate a tick to 3.9 percent from 4 percent.

Employers added 157,000 jobs last month, a modest gain, the Labor Department said Friday. That's below the 215,000 average for the first seven months this year, but economists said the decline will likely prove temporary.

Consumers are spending freely and businesses are stepping up their investment in buildings and equipment, accelerating growth. That's raising demand for workers in industries ranging from manufacturing to construction to health care. The economy expanded at a 4.1 percent annual rate in the April-June quarter, the strongest showing in nearly four years.

CBS News Business Analyst Jill Schlesinger noted that the actual month of July came in slightly lower than expectations, but that should not be taken as bad news.

“The numbers are given to revisions, and what we found out about the two previous months? We got an extra 59,000 jobs that we did not count on from the beginning. And you know, that means that we’ve got average job creation this year of 215,000,” Schlesinger said. “You know, that is an incredibly strong number considering how far into this recovery we are. We’re in our 10th year of an expansion.”

The 157,000 added jobs fell short of the 190,000 anticipated by some analysts, but Schlesinger called that a “shortsighted analysis.”

“Look, it’s a good report –broad-based hiring; 51,000 jobs – professional business services, manufacturing, health care, social assistance, food places, drinking places – everything there is good. I think we are still worrying about the hourly growth in wages – up by 2.7 percent from a year ago. You know, look, as prices are increasing, we really do expect those wages to go up,” she said.

Schlesinger noted that a new report from CareerBuilder said two thirds of U.S. employers plan to hire more full-time workers in the second half of the year, and 58 percent of employers say they are going to give out raises by the end of the year.

The smaller job gain likely reflected some one-time factors, analysts said. Local governments cut 20,000 jobs, the most in more than two years. Most were in education, suggesting some of the decline reflects the start of summer school holidays.

And sporting goods, hobby and toy stores shed 32,000 jobs, by far the most on records dating back to 1990. That is the result of the Toys R Us bankruptcy, economists said.

Excluding those factors, hiring in July would have been closer to the monthly average this year.

"This job growth is nothing to be disappointed about, particularly at this stage of the recovery," said Martha Gimbel, director of economic research at job search website Indeed. The economy is now entering its tenth year of expansion, and hiring has actually accelerated this year compared with 2017, surprising most analysts.

Stocks rose moderately after the report was released. The Dow Jones industrial average increased 82 points in mid-day trading to 25,408.

Average hourly pay gains remained modest, increasing 2.7 percent from a year earlier, the same as the previous two months. That has puzzled Federal Reserve Chairman Jerome Powell and many economists. Typically, when unemployment has fallen below 4 percent in the past, wages have increased at a faster pace.

With rising gas prices pushing up inflation, Americans actually saw their inflation-adjusted pay decrease in the past year. Consumer prices rose 2.9 percent in June from a year earlier, more than the average wage gain.

One cloud on the horizon has been the Trump administration's trade fights with China, the European Union, Canada and Mexico. The White House has slapped tariffs on steel and aluminum and on $34 billion of imports from China, and several companies have hit U.S. imports with retaliatory duties.

The Trump administration has also said it would be looking at another $200 billion worth of Chinese goods to place tariffs on, and at first, the government said 10 percent tariffs before suggesting 20 or 25 percent tariffs.

“Now China says, ‘Hey, you go to that level, and we’ll slap tariffs on $60 billion of U.S. products. So it’s all conditioned by the decision whether the Trump administration is to move forward with an additional $200 billion. If that happens, China is going to retaliate,” Schlesinger said. “Remember, we import much more from China than they import from us, so they’re not going to be able to go tit for tat. They can make U.S. companies suffer, though, so I think that this next round is going to be really critical to see whether or not we can get back to the table and get a deal banged out.”

Yet the trade fights didn't appear to impact hiring last month. Manufacturers, among the most directly affected by the import taxes, added 37,000 jobs, the most in seven months.

Manufacturers have likely benefited from oil and gas drillers nearly doubling their investment in drilling rigs and other structures this spring. That's boosted factory output of steel pipe and other drilling equipment. The new spending follows a 60 percent jump in oil prices in the past year.

Companies say they are struggling to find workers, with job openings higher than the number of unemployed for the first time in decades.

In response, many firms appear to be giving part-time workers longer hours. The number of part-time workers who would prefer full-time work has fallen nearly 13 percent in the past year and now stands at 4.6 million. That's the fewest in 11 years.

And the underemployment rate — which includes discouraged workers no longer searching for work, as well as involuntary part-time workers — dropped to 7.5 percent, the lowest in 17 years, from 7.8 percent.

Brian England, the owner of BA Auto, a car repair shop in Columbia, Maryland, would like to add another technician and an apprentice to his 18-member staff.

Yet auto repair work requires more technical skills than the past because of the increasing concentration of computers and electronics in newer cars. He also wants his mechanics to have teamwork skills because complex repairs can require more than one worker.

He has raised starting pay roughly 10 percent in the past two years, from $60,000 to between $65,000 and $70,000.

"The more you make an employee healthy and happy, the more that they're going to stay with you," England said.

Lower-skilled workers are also benefiting from companies' demand for labor. The unemployment rate for those without a high-school diploma fell to 5.1 percent, the lowest on record.

The economy is projected to grow at about a 3 percent pace for the rest of the year, which would likely mean that growth for all of 2018 would top 3 percent for the first time since 2005.

(© 2018 WCBS 880. The Associated Press contributed to this report.)