US July Payroll Employment Rises Moderately

• July 2013 non-farm payroll employment was 162,000 following downwardly revised gains in June and May of 188,000 and 176,000, respectively.

• The separate household survey indicated that the July unemployment rate dropped more than expected to 7.4% from 7.6% in June.

• Government employment was relatively steady rising 1,000 in the month and resulting in a 161,000 gain in private employment.

• While slight moderation in employment growth in July was disappointing, the pace remained sufficient to support both consumer spending growth and a further recovery in the housing market for the remainder of 2013. The drop in the unemployment rate should provide an additional lift to consumer confidence. With the effect of fiscal restraint expected to ease during the second half of 2013, continued job gains augur well for GDP growth to return to an above-potential rate on a sustained basis. As this becomes evident in the economic data, the Fed is expected to start reducing asset purchases. Such could commence as early as this fall with the purchases program fully wound down by the middle of 2014.

July 2013 payroll employment moderated to 162,000 from downwardly revised gains both in June to 188,000 (195,000 previously) and in May to 176,000 (195,000 previously). Expectations had been for a monthly increase in July of 185,000. In contrast, the household survey provided some better than expected news with the unemployment rate dropping to 7.4% from 7.6% in June. This result was from household employment rising 227,000 in the face of a 37,000 drop in the labour force. Market expectations had been for a moderate drop to 7.5%.

Government employment was relatively steady in the month in rising only 1,000 following an 8,000 drop in June. This implied a private-employment gain in July of 161,000, which was down from a 196,000 gain for the previous month.

Within private-sector employment, the increase largely reflected a 157,000 increase in service-producing jobs after a 188,000 gain in June. The increase in July was relatively broadly based by sector and led by gains in retail (46,800), professional and business services (36,000), and leisure and hospitality (23,000). Goods-producing sectors generated only 4,000 jobs with modest increases in manufacturing (6,000) and mining (4,000) partially offset by a 6,000 drop in construction.

The overall workweek disappointingly fell to 34.4 hours from 34.5 hours in June. The drop in the manufacturing sector was even greater at 40.6 hours from 40.8 hours during this same period. The index of aggregate weekly hours, which reflects the combined effect of both employment and hours worked, dropped 0.1% and reflected the drop in the workweek.

The index of average hourly earnings, the principal wage measure in the report, unexpectedly fell 0.1% although this provided some offset to June’s unexpectedly large 0.4% gain. Expectations had been for a 0.2% increase. The reported decline contributed to the year-over-year rate in July moderating to 1.9% from 2.1% in the previous month.

While slight moderation in employment growth in July was disappointing, the pace remains sufficient to support both consumer spending growth and a further recovery in the housing market for the remainder of 2013. The drop in the unemployment rate should provide an additional lift to consumer confidence. With the effect of fiscal restraint expected to ease in the second half of 2013, continued job gains augur well for gross domestic product (GDP) growth to return to an above-potential rate on a sustained basis. As this becomes evident in the economic data, the Fed is expected to start reducing asset purchases. Such could commence as early as this fall with the purchases program fully wound down by the middle of 2014.

 

RBC

Powered by WPeMatico

Share
This entry was posted in Forex. Bookmark the permalink.

Comments are closed.