U.S. job growth eases but tops 200K for 6th month

Economy appears to be accelerating after five sluggish years
Associated Press
Aug 1, 2014

A sixth straight month of solid 200,000-plus job growth in July reinforced growing evidence that the U.S. economy is accelerating after five years of sluggish expansion.

Employers added 209,000 jobs last month. Though that was fewer than in the previous three months, the economy has now produced an average 244,000 jobs a month since February — the best six-month string in eight years.

At the same time, most economists think the pace of job growth isn't enough to cause the Federal Reserve to speed up its timetable for raising interest rates. Most still think the Fed will start raising rates to ward off inflation around mid-2015.

The Labor Department's jobs report Friday pointed to an economy that has bounced back with force after a grim start to the year and is expected to sustain its strength into 2015. Economists generally expect it to grow at a 3 percent annual rate in the second half of this year after expanding 4 percent in the second quarter. Consumer spending is rising, manufacturing is expanding rapidly and auto sales are up.

"There is no doubt that the economy and the labor market have been strengthening," said Sung Won Sohn, an economist at California State University's Smith School of Business. "People are rejoining the labor force. All these factors point to moderate, but sustained economic growth in 2014."

Speaking with reporters Friday afternoon, President Barack Obama declared that the economy "is clearly getting stronger. ... Our engines are revving a little bit louder."

In an encouraging sign, more people without jobs have started to look for one — a shift that nudged up the unemployment rate in July to 6.2 percent from 6.1 percent. Most of those who began searching last month didn't find jobs. But the increase suggests they're more optimistic about their prospects. The jobless aren't counted as unemployed unless they're actively seeking work.

Still, Americans' paychecks are barely growing. That gives the Fed leeway to keep its benchmark interest rate near zero without worrying so much about higher inflation.

Investors were unimpressed by Friday's data. The Dow Jones industrial average fell 70 points and broader indexes also fell. The yield on the 10-year Treasury note dipped, suggesting less concern about a Fed rate increase.

In one encouraging sign, a higher proportion of July's job gains were in higher-paying industries. That's a shift from much of the recovery, which has been marked by outsized gains in lower-paying fields such as restaurants, retail and home health care aides.

Manufacturing added 28,000 jobs in July, the most in eight months. Construction added 22,000 and financial services 7,000, its fourth straight gain. Accounting, bookkeeping and computer networking jobs also showed gains. And architectural and engineering jobs jumped 8,800, the most since January 2007.

"This is particularly important for new college graduates as it suggests that the market for individuals with higher education is finally firming," said Diane Swonk, chief economist at Mesirow Financial.

Job growth is pushing up wages in some sectors. But the increases haven't been widespread.

Ted Toth, vice president of a factory in Pennsauken, New Jersey, that makes parts for satellite, radar and GPS systems, says he has four available jobs that pay from $20 to $32 an hour. But he hasn't been able to find employees qualified to fill them.

His company, Rosenberger North America, raised wages 6 percent earlier this year to fend off efforts by competitors to poach its employees.

"Everybody's stealing from each other," he said.

As hiring has increased and more people have begun seeking work, the proportion of working-age adults who either have a job or are looking for one rose slightly in July from a 36-year low to 62.9 percent. It was the first increase in four months.

The number of unemployed rose 197,000 to 9.7 million. Nearly three-fourths of that increase represented people who resumed their job hunts after previously giving up. The number of people who were unemployed because they had been laid off actually declined in July.

The lack of significant pay increases for most Americans has been a factor hobbling the recovery. Higher pay is needed to fuel consumer spending, which makes up nearly 70 percent of economic activity.

In July, average hourly earnings ticked up just a penny to $24.45. That was just 2 percent more than it was 12 months earlier and was slightly below inflation of 2.1 percent. In a healthy economy, wages before inflation would rise 3.5 percent to 4 percent annually.

Pay has failed to accelerate in part because many Americans are still uncertain about the economy's long-term health, said Mike Schenk, a senior economist at the Credit Union National Association.

Schenk expects wages to pick up once the unemployment rate falls to around 5.5 percent — a level at which some businesses will have to increase pay to keep workers and some employees will be more confident asking for a raise.

"People are still bruised," Schenk said. "I don't think they feel comfortable, generally speaking, walking in and asking for raises at this point."

Many more people are either out of work or are underemployed than the unemployment rate indicates, economists note. That can also keep a lid on pay.

Richard Moody, chief economist at Regions Financial Corporation, notes that 7.5 million Americans who are working part time would like full-time work, up from 7.3 million in January. An additional 2.2 million have stopped searching but would take a job if it was available.

On top of the 9.7 million people the government counts as unemployed, an additional 9.7 million either want a job or would like more hours. Combined, the three categories make up an "underemployment" rate of 12.2 percent.

That "is still far above any level that could be considered normal in a healthy labor market," Moody said.

Those are the figures that Federal Reserve policymakers were reviewing at a meeting this week, after which they concluded that "there remains significant underutilization of labor resources."

The challenge for the Fed is timing when to raise short-term rates. If it moves too soon to raise rates, the Fed risks choking off early signs of rising wages. If it acts too late to raise them, it risks causing inflation to surge.

Zach Pandl, a strategist at the financial firm Columbia Management, expects the Fed to start raising rates next spring.

"Wages are a lagging indicator, always the last piece of the puzzle in a recovery," Pandl said.

 

Comments

Blackberry Phale

The economy is doing so well that we only have 47 million on food stamps.

The Bizness

Not true, it is under 47 million now.

The Hero Zone's picture
The Hero Zone

True, though it is still unfortunately high. As of April, the number was 46,247,450 (http://frac.org/reports-and-reso...). I'll happily take fewer on the program, don't get me wrong, but if we are in some kind of a recovery a lot of context is needed to make sure it is handled and understood well. As was mentioned below, raw job creation doesn't tell the complete tale as many people are working several part-time jobs.

So here's to continued improvement, but with full knowledge of what is going on and how much it costs.

On that note...Today’s Federal Debt is about $17,593,144,893,000.

http://www.usgovernmentdebt.us/

“If the world is saved, it will not be saved by old minds with new programs but by new minds with no programs at all.” ― Daniel Quinn, The Story of B: An Adventure of the Mind and Spirit

It's going to take young people like us, Biz, to get the word out and stop the old ways of doing things as it has led to the conditions about which we're talking about.

The Big Dog's back

So are you ready to penalize these companies who have taken our jobs overseas?

The Hero Zone's picture
The Hero Zone

Big Dog, I understand your sentiment but this isn't about penalizing companies. It is about empowering the individual and letting their creativity and dignity flourish. Penalizing companies doesn't help anyone and is quite a negative thing to do. This needs to be positive and uplifting if it is to be anything.

deertracker

You are right HZ, unfortunately those that have the power to move America forward are too greedy!

The Hero Zone's picture
The Hero Zone

Those that have the power you imply are too few, though their resources are great. The true power lies in a population that seems to be blissfully (and willfully, for disagreeable but understandable reasons) ignorant. There are authors who prove this is the result of our educational system. That we are raised to trust institutions and not question (civilly, respectfully) those in a position of authority.

Empowering the base with education and a sense of curiosity, along with a few other measures, would see much of that stagnant "greed" fall away.

The Big Dog's back

Sometimes hz you need to step out of that Utopian dream you're in and come to grips with reality. The only way these people and corporations are going to change is when you hit them where it hurts, their wallets. Yes it would be nice if they all came together singing kumbaya, but it ain't gonna happen.

Contango

Re: "hit them where it hurts, their wallets,"

Great plan if you want to watch individuals give up their citizenship and corps. leave the country or get bought out by foreign corps. with lower home country marginal tax rates.

The Big Dog's back

Let them go! There will be someone there to take their place.

Contango

Re: "There will be someone there to take their place."

Reads like the ol' "hopey, changey" thingy.

The Hero Zone's picture
The Hero Zone

So supporting education is utopian, Big Dog? Education is the greatest equalizing force in the world. It is what defines us as a species biologically, philosophically, and morally. You'd be the last person I suspect would be against educational efforts.

But let's use my shop for example. Let's say you really want to stick it to me because you don't think I do enough for the community. Let's say that if you punish me 10% more with higher taxes, you will sate your appetite for corporate blood. Two things happen:

1. I as a business owner rather enjoy the life/lifestyle the shop affords me. So, as things go, the customers end up paying 10% more to cover the imposed tax so I maintain my life and all the things I do with it (including donating money, time, product, and saving up for major investments, etc.).

2. I cannot afford the altruism you imposed on me and thus have to shut my doors. Perhaps it's because I can't afford to not pass on your increased tax to my customers. Or, because you have disincentivized me staying in business even when I technically could, I close up entirely not wanting to deal with it any more and removing all the taxes I otherwise generate as well as adding to unemployment and downtown empty buildings.

“The relevant measures are not ease and difficulty. The relevant measures are readiness and unreadiness. If the time isn’t right for a new idea, no power on earth can make it catch on, but if the time is right, it will sweep the world like wildfire.” ― Daniel Quinn, The Story of B: An Adventure of the Mind and Spirit

The Big Dog's back

hz, why would you try to equivocate yourself with the big boys? No offense but you're a small player in the game. You're the type the big boys ran over, ie, mom and pop shops. The sooner you realize you are not one of "them" maybe we can move forward.

The Hero Zone's picture
The Hero Zone

Why wouldn't I? I "pay" just as much sales tax as Walmart does - $0. The concepts, even for income tax, are still the same. I used me as an example because of those similarities and to "bring it home". Probably where I do differ from Walmart is that I can't hire lawyers and accountants to "loophole" out of taxes, a legal tactic even if you don't like the practice. Besides, what incentive do I have to try and break into the "big boy" status if I am going to be penalized by you and others for my success?

This is why I support a FAIR Tax (http://www.fairtax.org/site/Page...) and you should, too. In my humble opinion.

By the way, I do appreciate you saying "no offense". None was taken here because of your consideration. Thank you. But please just consider we can't penalize our way to prosperity. We can, however, educate our citizenry to achieve it. If I can be considered a "bleeding heart" over something it is this.

The Big Dog's back

hz, the big boys have been penalizing the working person for years. Where do you think their money came from? I tried to separate you from the big boys but that didn't work. Why do you think you're in the same boat as them? I'm serious. Please explain it to me. Do you really believe all of the big boys started out with nothing?

The Hero Zone's picture
The Hero Zone

Some did. Maybe many. But not all. I am no different than the "big boys" because the same principles apply to big box as they do ma-n-pa. For a parallel this is also why the "middle-class" doesn't exist. We are all still humans with the same needs, wants, and desires. Separating people as you try to do (flat statement, not accusatory) doesn't help and only makes a mess of things. Why should I let someone else relegate me to the small time with low expectations when I want to surpass them and reach for better? It's not even me being uppity or spitefully defiant. It's about dignity and opportunity, neither of which can be conferred by outside forces.
By the by, thank you again for the conversation and questions.

The Big Dog's back

I never said you won't be successful. And I know you don't believe that the same set of rules for the big boys are the same set you follow. You're joking right? So you are privy to inside trading? Offshore accounts? You have lawyers working 24/7 on dodging rules and regulations? Do I really need to go on?

The Hero Zone's picture
The Hero Zone

And yet a majority of what you talk about is legal. Is it bad tax law or a jobs program? Those laws were written by some Congress and signed by some President. I'm sure I could have an offshore account if I want, but I'm not as incentivized as bigger companies because of punitive tax measures.

Sounds like we agree that a FAIR Tax is needed to work this out. Wouldn't it be nice for you as a citizen to understand the tax code which you are meant to live by and pay? No exemptions nor need to retain lawyers to find holes?

If you want the same set of rules then here it is. No separation. Just like above. Also thanks for wishing me success.

The Big Dog's back

Like I've said in the past, I will never be able to wrap my head around the fact that people like yourself equivocate yourselves with the rich. No sense in going on with this because I will never understand it. Go luck on joining the 1%. And no I'm not for the "fair" tax.

Contango

Re: "I will never understand it."

But you support wealthy 1% liberals like Warren Buffett, the Kerrys, the Pelosis, the Reids, the Obamas, the Kennedys, Al Gore, the Clintons, et. al.

Enjoy the crumbs the State will dispense to you as a senior.

The Big Dog's back

I want them taxed just like the rich Repubs, forbes, the kochs, issa, mcmahons, romney's, bushes, drudge, mccains, hannity, coulter, palin, etc.

Contango

Re: "I want them taxed,"

They are.

Keep supporting those rich liberal one percenters; like they give sh*t about you.

The Hero Zone's picture
The Hero Zone

Why do you say it "fair" and what about it don't you like? It's a progressive sales tax that allows for no loopholes and benefits all, especially by having the ability to collect taxes on illegal activity such as drugs or "under the table" jobs. You should be this tax's loudest cheerleader. But as I said, I'd be interested in learning why you oppose it.

As for why/how I can equivocate myself with "the rich"? Because they are a human being as am I regardless of how much money they or I have. If you (general "you", not necessarily you-you) have to turn a human being into something not human in order to justify calling them names and treating them any differently than just that...it's a very bad habit to have. That tactic has been used to split societies, keep hate alive, and justify atrocities across the planet for thousands of years.

"We're the good guys. But those Jews/blacks/gypsies/Italians/Sunni/Mongols/Zulu/rich/gays/Democrats? Yeah we need to take care of them." As if any of those people are less human than the ones making it ok to hate based on existence alone. By excluding them from being human, like you, it somehow makes it okay to spread notions like the above?

The Irish aren't keeping you from having your dream job. That Japanese guy isn't preventing you from being rich. They are living their lives as you are yours. If they can do it, so can you because you are human just like them. There is no difference between you and a "rich" person, and even then, you are only judging someone by their wallet. Aren't you as "rich" as they in happiness? Pride? Enjoyment of hobbies, loved ones, etc.?

That's exactly why I can equivocate myself with a "rich" person. Because there's no difference between us.

Now, about that FAIR Tax...

P.S. - You may like this book: http://www.amazon.com/Millionair...

I

Big Dog, do all those corporate sponsors of your race car, the ones that provide your livelihood, know how much you truly despise them?

Blackberry Phale

If an employer has forty hours worth of work and avoids Obamacare by hiring two part-time people, has he created two new jobs?

SunshineDaydream

Unfortunately, yes.

deertracker

That is a very simplistic view and not accurate!

The Hero Zone's picture
The Hero Zone

It's unfortunately accurate, deer. In business it's known as the "29-49 Rule". You employ 49 or less employees and/or make sure they are given 29 or fewer hours so that you aren't penalized by the ACA. I can provide you a couple links though saying, also unfortunately, in half-sarcasm who knows with the constant law-changing how much of this is true or when it will go into effect.

Under the law, those employing 50 or more full-time workers or "full-time equivalent" employees may be fined at least $2,000 per employee -- excluding the first 30 workers -- as of 2014 for not providing affordable, qualifying health plans to employees averaging 30 or more hours per week, according to the Kaiser Family Foundation.
http://www.entrepreneur.com/arti...

If you want all the nuances, you have to wade through voluminous regulations. In general, though, a full-time employee is one working at least 30 hours a week. The IRS regulations include several different ways of counting full-time employees, but some of it is intuitive.

On the other hand, the definition can sneak up on you. A new employee who is reasonably expected to be a full-time employee is counted immediately. Full-time equivalent employees are counted too. You divide the hours of all part-time employees for the month by 120.
http://www.forbes.com/sites/robe...

How else can we explain the fact that our government touts all these created jobs yet unemployment itself remains steady? It is showing that the same people are working more jobs because those jobs are part-time. I see it every day in my store's community. It is a simple answer as it is true.

deertracker

Do you have 50 employees? Most small businesses don't. The ACA is not hurting businesses but businesses really think they are going to lose money by having a healthy workforce. You have to take it full circle and not just be concerned about you.....rhetorically speaking! No business is successful without good employees but businesses fail all the time with good employees. To give yourself credit for creating A job while denying your other 49 employees a little security from a health standpoint is backwards thinking. Better benefits attract better employees and give the employer leverage over other businesses and what you can demand from your employees. In the end everyone has a shot at success.

The Hero Zone's picture
The Hero Zone

I can't speak for other businesses, and I do understand you are rhetorically speaking to me above. That said...it still is what it is. The government has made their dam in the stream regarding ACA regulations. As we all know, water always wins. It has found the copious leaks and cracks this dam has and is still pouring through. Your thoughts on what businesses and the ACA should do are well-meaning as you described, but that still doesn't count the fact that we see what is happening - happen.

Please know I'm not encouraging businesses to abide by said rule, however we can see where it IS and ACTIVELY working. The constant tweaks and delays only complicate things more. But the more Congress tries to regulate this stuff, the less work and other benefits of employment will occur.

Princess Leia: The more you tighten your grip, Tarkin, the more star systems will slip through your fingers.
Star Wars (1977)

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