Job growth weaker
Employers add fewer jobs than expected to payrolls as unemployment rate shows an unexpected rise.
NEW YORK (CNNMoney.com) -- Employers added fewer jobs to payrolls in July, while the unemployment rate rose unexpectedly, according to the government's latest reading on the labor market.
The government's data came in below Wall Street's expectations.
There was a net increase of 92,000 jobs in the month, down from 126,000 added in June, a reading that was revised lower in the latest report. Economists surveyed by Briefing.com had forecast a 135,000 gain in July.
The unemployment rate was 4.6 percent, up from 4.5 percent in June. Economists had forecast that the rate would remain unchanged.
The unemployment rate is calculated using a separate survey of households, rather than the survey of employers that is used to calculate the payroll number. And the households surveyed showed a net decline of 30,000 jobs in the month.
The average hourly wage rose 6 cents, or 0.3 percent, to $17.45. That matched the revised rise seen in June, as well as analyst forecasts. The average hourly wage is now up 4 percent from a year ago, growing faster than the 2.7 percent rise in prices posted during the 12 months ending in June, according to a separate Labor Department reading.
The employer survey showed a 12,000 drop in construction employment jobs in the month, while manufacturing and retail also posted small job losses. Government also cut back on jobs, with the public sector showing a seasonally-adjusted 28,000 job drop.
The sectors that did show growth were education and health services, leisure and hospitality, and business and professional services.
"Government was where the biggest surprise was, and outside of government, I thought this report was fine, said Jeoff Hall, the chief U.S. economist for Thomson Financial. "We'll have to wait to see how it develops, but I don't think it's an iceberg, with more trouble below the surface. I'd have to see another substantial weak employment report to think this is something to be mindful of."
But John Silvia, chief economist with Wachovia, said the report is a further sign that the economy is slowing down and could be weaker than current forecasts in the second half of the year.
"Obviously the economy has slowed down to subpar growth," said Silvia.
Stock opened lower on the weaker-than-expected result, while Treasury prices rallied, cutting the yield on the 10-year note to 4.75 from the 4.77 percent level immediately before the report.
The closely followed report comes ahead of Tuesday's meeting of policymakers at the Federal Reserve.
Economists widely believe the central bank will leave rates unchanged at that meeting, but there has been a growing belief in the markets that a rate cut later this year is possible due to problems in the U.S. credit markets and worsening problems in the real estate and home building.
Silvia said he doesn't believe that the Fed will raise any alarm bells about the slowdown in the economy in the statement it will release at the end of the meeting. But he said that with all signs that inflation pressures have moderated, there could be a rate cut by the end of the year if employment continues to lag.
"If we're seeing growth in the third quarter closer to 2 than to 3 percent, they'll have to go with the flow and fight inflation another day," he said.