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Job Growth Wanes in July; Unemployment Rate Edges Up

UnemploymentUpdated.

U.S. payrolls grew less than expected in July, a potential sign that the labor market recovery might be cooling following an early summer hiring spike.

According to the Department of Labor, the economy added 209,000 jobs last month, coming in under the 233,000 predicted by economists. The national unemployment rate ticked up from 6.1 percent to 6.2 percent.

While weaker than anticipated, July's payroll figures mark the sixth consecutive month that employment has grown by at least 200,000, the longest streak since 1997.

Meanwhile, payrolls for May and June were revised to reflect slightly stronger growth, coming up to increases of 229,000 and 298,000, respectively.

The biggest gains in July were seen in professional and business services (+47,000 jobs), manufacturing (+28,000), retail trade (+27,000), and construction (+22,000).

As of July, nearly 9.7 million people in the United States were counted as unemployment, an increase of 200,000 from June. The change reflects a surge in people returning to the labor market, which brought the labor participation rate up to 62.9 percent.

In less encouraging news: Out of those Americans who are unemployed, nearly a third have been jobless for more than 27 weeks. At the same time, about 7.5 million Americans are employed part-time for economic reasons (such as having their hours cut back), while an addition 2.2 million are "marginally attached," meaning they're not in the labor force but have looked for a job sometime in the last year. About a third of that group are classified as "discouraged"—not currently looking for work because they believe there is nothing for them.

The July report comes during a big week in economic news. On Wednesday, the Commerce Department reported annualized GDP growth of 4.0 percent in the second quarter, a sharp turn from the 2.1 percent contraction reported in the first quarter. While the Q2 estimate is likely to come down in future revisions, analysts still took it as a sign of a reversal of momentum for the economy.

Also on Wednesday, the Federal Reserve announced plans to continue tapering its monthly asset purchases, keeping its policy on track to close by the end of 2014.

Though the latest data indicates there's still some slack in the labor market, analysts see little reason for the Fed to veer from its current path.

"[T]here is nothing here that changes our view that the Fed will begin to raise rates in March next year, a little earlier than most expect," said Paul Ashworth, chief U.S. economist for Capital Economics.

Among other indicators: The average workweek for all employees on nonfarm payrolls was 34.5 hours, unchanged for the fifth straight month. Meanwhile, average hourly earnings just barely inched up to $24.45.

 

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