(Updated with comments from NAM and Prudential.)
The nation's unemployment rate crept up in July, rising to 4.8 percent, as the total number of nonfarm jobs created came in slightly below what economists had been forecasting.The Labor Department said Friday that nonfarm jobs rose by 113,000 in July, mostly in service-providing industries like healthcare and food services. Economists had predicted a number closer to 150,000. The unemployment rate had been at 4.6 percent.
Manufacturing employment edged down by 15,000 in July, which essentially offset a gain in June. In July, job losses in transportation equipment (-9,000), computer and electronic products (-8,000), and textile mills (-2,000) more than offset employment increases in machinery (+8,000) and chemicals (+4,000).
David Huether, chief economist at the National Association of Manufacturers, noted that July's numbers mark the fourth straight month of sub-par job creation, and he said that with retail and construction employment trending lower, higher energy prices and a cooling housing market have clearly combined to hit the U.S. economy."With this in mind, the Federal Reserve would be well advised to hold interest rates at their present levels when the Federal Open Market Committee meets next week," he said.
In the goods-producing sector, mining employment grew by 8,000 in July. The industry has added 123,000 jobs since its most recent low in April 2003, largely reflecting gains in support activities for oil and gas. In July, construction employment was little changed for the fifth consecutive month.
Average hourly earnings rose by 7 cents, or 0.4 percent, to $16.76.
The employment data come just a few days in front of a Federal Reserve meeting where the central bank will decide whether or not to raise interest rates for the 18th-straight meeting since mid-2004. The softer-than-expected numbers, combined with other recent data that have showed signs of a cooling U.S. economy, might be enough to allow the Fed a pause in its tightening campaign, a move that would be welcomed by the manufacturing industry.
"We think this makes a pretty clear case for a pause from the Fed when they meet next week," said Ed Keon, chief investment strategist at Prudential. "Clearly, the economy is slowing and the labor market, although not in terrible shape, is slowing from the pace we had last year. The inflation numbers are still running a little hot, but inflation is a lagging indicator and there is plenty of precedent for the Fed stopping before inflation peaks."
Huether pointed out that July's data reinforce the uneven employment situation in manufacturing, with production employment up 1,000 and non-production employment off by 16,000 in the month. Over the past 10 months, production employment in manufacturing has risen by 171,000, the best performance in eight years, while non-production employment has continued to fall. The rise in production employment has been focused in four industries: computers, fabricated metals, machinery and transportation products.
"As the economy continues to transition from housing and consumer-led growth to investment and exports-led growth, I expect this growth in production employment will continue in the months ahead," Huether said.