The good news is that the economy added 163,000 jobs in July following an extremely anemic three month period of job growth. The bad news is that even so, the unemployment rate ticked up to 8.3 percent the Bureau of Labor Statistics reported. Growth in manufacturing was 25,000 jobs, a level not seen since March of this year. Restaurants and bars added 29,000 employees, retail stores brought on 7,000 additional workers and health and education services topped the leaders by adding 38,000 new workers. Government though eliminated 9,000 workers.
Wages rose on average 2 cents – over the last year employee wages have risen by 1.7 percent keeping pace with the rate of inflation.
Futures tracking the Standard & Poor’s 500 index and the Dow Jones industrial average rose roughly one percent as investors are apparently happy with the report. This follows a week of ongoing losses. Government bond yields also rose after the report was published as investors moved their money out of safe government assets and into the more volatile stock market.
With the job creation number surpassing 150,000 in July the Federal Reserve may be less likely to act in order to boost hiring, a measure they implied they would take in a statement following a two-day policy meeting that ended on Wednesday of this week.
The latest report will likely help President Obama’s campaign for reelection although the unemployment rate has not been below 8 percent since his first month in office. This is the longest period of unemployment not significantly declining on record. Since the end of World War II no incumbent president has attempted reelection with unemployment at over 8 percent.
Although economists declared the end of the recession in June 2009 the economy remains lethargic. Last quarter United States economic growth slid to an annual rate of 1.5 percent, a full half point lower than the first quarter of the year which posted growth of 2 percent, and far lower than the 4.1 growth rate seen in the last quarter of 2011.
Despite the job gains in manufacturing recorded in today’s report, a report issued on Wednesday showed shrinking manufacturing economy for two months ending in July 2012. On the up side, though still weak, consumer confidence rose a bit in June.
Continued sluggishness in the US economy, worries about the European economic crisis and the US congress seemingly ready to let the US economy fall off a “fiscal cliff” at year’s end along with scheduled budget cuts and possible across the board income tax hikes if Congress fails to act prompted Fed Chairman Ben Bernanke to warn that the result of this perfect storm could be a recession has led to consumer worries.
In response, American consumers are spending less. The American economy is dependent on consumer spending for 70 percent of its economic activity. This spend less, save more mind-set is the primary reason growth slowed to an annual rate of 1.5 percent last quarter.