U.S. Payrolls Up Slightly; Jobless Rate Still 4.6%
Saturday, July 8, 2006
Employers hired cautiously last month as the economy lost steam, but they added enough new jobs to hold the nation's unemployment rate steady at 4.6 percent, the Labor Department reported yesterday.
Workers landed 121,000 new payroll jobs in June, up from the lackluster 92,000 positions gained in May.
But employers added fewer jobs in the past three months than in the previous quarter, slowing the pace of job growth this year as the housing market cooled and rising energy prices and interest rates started crimping consumer spending.
Home builders, lenders, insurers, auto dealers and department stores were among the employers that cut jobs last month, the Labor Department data show.
"Another soft employment report points to a slowing economy," said Nigel Gault, U.S. economist for Global Insight Inc., an economic forecasting and analysis firm.
One bright spot for workers was rising wages. Average hourly earnings rose by 8 cents, to $16.70. That added up to a 3.9 percent increase over the 12 months that ended in June and the biggest annual gain in five years.
Some analysts said the increase in average wages may partly reflect a shift in the job mix, as higher-paying manufacturers added to their payrolls while lower-paying retailers trimmed theirs. That could reverse in coming months as U.S. automakers proceed with plans to eliminate tens of thousands of jobs.
Employers more than offset the job cuts by hiring more accountants, computer system designers, health-care providers, government workers and others, the Labor Department report showed.
Stocks were mixed after the report was released, as analysts debated whether it would persuade the Federal Reserve to stop raising interest rates because of the slowing economy or to keep raising them because of inflation pressures. Oil prices rose to a new intraday record of $75.78 a barrel during trading yesterday on the New York Mercantile Exchange.
Many analysts estimate that the economy expanded at an annual rate of about 2.5 percent in the second quarter, less than half the rapid 5.6 percent pace of the first quarter.
"That will raise hope that the Fed might be able to stop raising rates, or at least take a pause" at its next policymaking meeting in August, Gault said. But he noted that consumer inflation, excluding food and energy prices, has crept higher in recent months, which he said should justify another interest rate increase. "We still think . . . Fed has a bit more work to do," Gault said.
Fed policymakers raised their benchmark short-term rate to 5.25 percent from 5 percent last week and signaled that they might lift it again to lower inflation. They expect the economic slowdown to weaken inflation pressures. But with energy prices moving higher, wages rising and unemployment low, they are not sure whether more interest rate increases will be needed to get the job done.
Rising interest rates have already caused home sales and residential construction spending to cool in recent months, resulting in a predictable effect on employment: Construction payrolls lost 4,000 jobs in June. That meant builders added just 10,000 jobs in the second quarter, a steep plunge from the 79,000 added in the first three months of the year.
Payrolls were flat last month at stores selling building materials, garden supplies, furniture and home furnishings. All the figures are adjusted for seasonal variation.
Other retailers cut 7,000 jobs last month, for a total of 86,000 positions eliminated over the past three months as rising gasoline prices pinched household budgets.
Job growth should continue to be modest in the months ahead because economic growth is likely to be mild, several analysts said.
The unemployment rate may stay low because the labor force -- the number of workers holding or looking for jobs -- is expanding at about the same pace as hiring.
Economists had estimated that the economy needed to add about 150,000 jobs a month to absorb new entrants to the labor force and hold the unemployment rate steady. Now, as the population ages and workforce expands more slowly, about 100,000 new jobs a month appears to be sufficient, Michael H. Moskow, president of the Federal Reserve Bank of Chicago, said in a speech last month.
The unemployment rate in June for white workers was unchanged in June at 4.1 percent. Black joblessness edged up to 9 percent from 8.9 percent, while unemployment among Hispanics and Latinos rose to 5.3 percent from 5 percent.