Slow train

The United States added an unexpectedly strong 163,000 jobs in July, though the jobless rate ticked up to 8.3 per cent. Job creation of late is matching population growth but reducing unemployment only slowly. It’s more evidence that recovery is stuck on the slow train in a sluggish new normal.

The details in Friday’s jobs report were mixed. Job gains in May were revised upward slightly, but those in June were revised downward a bit. And, the decent-looking gains last month may have included some distortions relating to the time of year: unadjusted for seasonal effects, total employment declined by 1.2 million.

 

The separate household survey used to calculate the unemployment rate told a slightly different story again. Those in work declined by 195,000, while the ranks of the jobless ticked up by 45,000 and the labour force declined by 150,000.

Taking a look at changes in the year since July 2011, nonfarm payrolls increased 1.8 million. In the household survey, employment is up by 2.8 million, while the civilian labour force has increased 1.7 million. That’s more in line with the longer-term trend. Employment is increasing steadily enough to absorb the increase in the workforce but the impact on the unemployment rate is very modest. After declining from an October 2009 peak of 10 percent, monthly readings in 2012 have fluctuated between 8.1 per cent and 8.3 per cent.

Manufacturing data for July from the Institute for Supply Management suggested a marginally better environment than in June, but the index was still just below the 50 level that signifies expansion. ISM’s non-manufacturing index is above that level and moved a bit higher in July. But both readings point to only slowly increasing activity in manufacturing and services alike. The jobs growth train is moving, but the long-term unemployed may have to wait a long time for it to arrive.