U.S. job growth tepid, jobless rate drops
By Andrea Hopkins
WASHINGTON (Reuters) – U.S. employers added 146,000 jobs in
June, below Wall Street’s forecasts, but the unemployment rate
fell to its lowest since September 2001 as few people joined
the labor force, a government report showed on Friday.
June’s tepid hiring fell short of analysts’ expectations of
188,500 new jobs and did not keep pace with population growth.
But the drop in the unemployment rate to 5.0 percent was a
surprise, since it was forecast to hold at 5.1 percent.
“It’s enough to keep the wolves at bay but not enough to
get excited about,” said Michael Jansen, currency strategist at
National Australia Bank in New York.
Economists said the rise in hiring suggested an economy
growing at a rate above 3 percent — strong enough to reassure
the Federal Reserve that a spring “soft patch” had evaporated,
but not enough to spark inflation worries.
“It’s very consistent with an economy that is growing at or
just below trend. It does not change anything for the Fed –
they’re going to raise rates again next month,” said Steve
Ricchiuto, chief U.S. economist at ABN AMRO in New York.
The central bank has raised short-term interest rates nine
times since last June in a bid to head off inflation, and
experts expect a tenth rate hike in August.
The Labor Department also revised up job growth in April
and May to 292,000 and 104,000, respectively, boosting the
two-month count by 44,000 payroll jobs.
Treasury Secretary John Snow hailed June’s job growth as
evidence the economy was “thriving.”
“More than 3.7 million jobs have been created since May
2003, with more than one million of those in the past six
months,” Snow said in a statement.
But not everyone was as optimistic, because the unexpected
decrease in the jobless rate was mostly due to a paltry 1,000
increase in the labor force — suggesting many Americans have
stopped looking for work.
“The decline is not a sign of vigorous labor market
activity, in our view, since it came in tandem with a pullback
in the labor force participation rate to 66.0 percent,”
economists at Merrill Lynch said.
Factory payrolls shrank for the fourth straight month as
auto assembly and parts plants cut back on production. Bloated
inventories have prompted many automakers to slow production
lines until demand can catch up. Some 96,000 manufacturing jobs
have been lost since August 2004.
While 18,000 workers were hired in the construction
industry last month, most of June’s employment growth came in
the service sector. Professional and business services jobs
rose by 56,000, education and health services were up 38,000
and leisure and hospitality payrolls grew by 19,000.
In a potentially troubling sign, the length of the average
workweek was 33.7 hours, unchanged from May’s downwardly
revised total. The factory workweek was also unchanged at 40.4
hours, while overtime held at 4.4 hours.
Employers typically increase the length of the workweek
before taking on new workers, so a lack of growth in that area
can mean scant hiring ahead.
Average hourly earnings rose 3 cents to $16.06 and have
risen 2.7 percent over the year.
A separate report by the Commerce Department showed
inventories at U.S. wholesalers rose just 0.1 percent in May,
below analysts’ forecasts, while sales were flat.
Wall Street analysts had expected wholesale inventories to
gain 0.5 percent.
(Additional reporting by Laura Macinnis)