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Economy Surprises with 163k New Jobs in July, Unemployment Rate Up

The nation added a surprising 163,000 jobs in July but the unemployment rate ticked up to 8.3 percent as the number of people working actually declined, the ""Bureau of Labor Statistics"":http://www.bls.gov/ reported Friday. At the same time, June’s paltry job gains â€" originally reported at 80,000 â€" were reduced to 64,000 while May’s job numbers edged up to 87,000 from 77,000.


Economists expected payrolls to grow by 100,000 and the unemployment rate to remain at 8.2 percent.

Average weekly hours remained 34.5 and average hourly earnings rose to $19.77 from $19.75, continuing pressure on household incomes.

While the increase in the unemployment rate was disappointing, an alternative measure showed even more strain. The employment-population ratio which measures the number of people employed against the entire over-16 population, without qualifying definitions used to determine “unemployment” dropped to 58.4 percent. The inverse of the ratio â€" 41.6 percent â€" represents the share of the over 16 population without jobs. At the onset of the recession in December 2007, the employment population ratio was 62.7 percent and when the recession officially ended in June 2009 it was 59.4.

The other widely followed alternative measure of employment which includes discouraged workers and others “marginally attached to the labor force,” rose to 15.0 percent in July from 14.9 percent in June.

The average duration of unemployment fell to 38.8 weeks in July â€" the lowest since April 2011 - from 39.9 in June.

About 40.7 percent of those unemployed have been out of work for more than 27 weeks â€" long-trem unemployed â€" down from 41.9 percent in June. However, the number of people unemployed for 5 to 14 weeks rose to 3,092,000 â€" the highest level since last October, hinting at a new wave of unemployment.

The increase in the unemployment rate â€" which has stubbornly remained above 8 percent for the 42 months â€" the entire Obama Administration â€" was the result of arithmetic, not any fundamental shift in the economy.


The number of people unemployed edged up 45,000, BLS estimated, to 12,794,000 but the entire labor force â€" consisting of employed and unemployed individuals contracted by 150,000 as 195,000 fewer people reported themselves as employed. The numerator of equation â€" unemployed â€" went up while the denominator â€" employed plus unemployed â€" went down, so the resulting fraction or percentage increased.

BLS uses two separate surveys â€" the establishment survey which tracks jobs and the household survey which tracks employment â€" to develop the report released Friday. Jobs and employment are defined differently in the two surveys.

Friday’s report contained a mixed bag of positive and negative signs. Within the establishment survey, the private sector added 172,000 jobs â€" the strongest showing since February â€" led by 49,000 new professional business service sector jobs. But, 14,100 of those jobs were temporary again suggesting employers don’t necessarily have confidence to make permanent additions to staff.

The education and health sector which shed 6,000 jobs in June added 38,000 in July â€" half in the heal sector. Education and health had, until June, been a consistent source of new jobs, adding an average of 39,000 jobs per month from June 2011 through May of this year.

The leisure and hospitality sector also added 27,000 jobs and the retail sector, which lost 3,200 jobs in June, added 6,700 in July. The retail and leisure and hospitality sector are the two lowest paying industry sectors. Virtually all the leisure and hospitality jobs in the food service sector reflecting summer staffing at restaurants.

The reading for housing and real estate was also mixed. According to the report there were 1,000 feewr construction jobs in July than in June. Residential building jobs grew by 5,800 but the number of residential specialty trade contractor construction jobs fell 3,100.

While financial sector jobs were up 1,000 in July, the number of real estate jobs (included in that sector) dropped and “depositary credit intermediation” jobs â€" underwriters â€" dropped by 1,100.

The payroll report was also affected by a strike of utility workers in New York City. Jobs are only included in the payroll report if positions are paid during the week of the month including the 12th calendar day of the month. About 9,000 Con Edison workers were on strike in New York in July but have since returned to work, which will boost the August payroll report.

The number of manufacturing jobs rose 25,000, the strongest gain since March led by 12,500 new auto jobs.

Government remained a drag on payrolls, shedding 9,000 jobs in July with 6,000 jobs cut by state governments.

About Author: Mark Lieberman

Mark Lieberman is the former Senior Economist at Fox Business Network. He is now Managing Director and Senior Economist at Economics Analytics Research. He can be heard each Friday on The Morning Briefing on POTUS on Sirius-XM Radio 124.

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