Jobless rate grows slightly; Mixed labor report encouraging for stock investors
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The U.S. stock markets surged upward Friday, following a mixed jobs report that showed more people getting work even as the unemployment rate rose. It seems the absence of bad news is now a form of good news when it comes to the nation's economy.
The Bureau of Labor Statistics reported Friday morning that unemployment in July ticked up slightly to 8.3 percent, at the same time the nation's employers added 163,000 jobs, a number that did not meet analysts expectations but still seemed to encourage investors.
Gus Faucher, a senior economist at Pittsburgh-based PNC Financial Services, said the report marked consistent, if not robust, growth in the jobs market.
"To some extent, this is employment catching up with what we've seen in the rest of the economy," Mr. Faucher said. He said job gains have averaged about 160,000 monthly for the first seven months of 2012.
Mr. Faucher said there are pluses and minuses in the economy.
On the upside, consumer confidence went up in July, businesses are starting to invest the money they have been sitting on back into their operations and the housing market is showing signs of turning around. On the downside, the European economic crisis continues to drag on the U.S. economy and there is political uncertainty on taxes and future spending because of uncertainty around the outcome of the U.S. presidential election.
The market reacted favorably to the jobs numbers. The Dow Jones Industrial Average closed at 13,096.17, up 217.29 or 1.69 percent. The Standard & Poor's 500 was up 25.99, or 1.90 percent to close at 1,390.98999 and the Nasdaq rose 58.13 to reach 2,967.90, up 2 percent.
That seemed a little too enthusiastic to some. "It's a good report, don't get me wrong, but I don't think the market should be up 225 points on it either," said Matt Yanni, a principal in Yanni & Associates Investment Advisors in Franklin Park.
He said he thought the addition of 163,000 jobs was, in part, a mistake of seasonal adjustment that was skewed earlier this year by hiring in the winter months. He thinks this month's numbers will later be revised downward.
"I would highly doubt we are going to see a number close to 163,000 in next month's report," he said.
In the first seven months of 2011, the unemployment rate never moved more than a tenth of a percentage point from 9 percent.
This year, that median for the first seven months was 8.2 percent.
July's higher unemployment rate came mostly due to rounding. In June, the unemployment rate, to the thousands, was 8.217 percent; in July, that was up to 8.254 percent, a difference of 37 one-hundredths of a percentage point.
The report was immediately seized upon by both major political parties to show why their policies should be adopted and their presidential candidate elected.
The numbers upon which the unemployment rate is factored are determined by a survey of households, which showed incremental changes in the wrong direction. The number of people employed fell by 185,000 and the number of unemployed rose by 45,000. About 348,000 dropped out of the labor force.
A separate survey of businesses found private employers added 172,000 jobs in July, but governments across the country cut 9,000 jobs, 7,000 of them in the nation's public schools.
Manufacturers in the country added 25,000 jobs, with 24,000 of those involved in creating durable goods. Companies that produce primary metals added 1,400 jobs and the makers of fabricated metal products, such as household appliances, put 5,200 more workers on their payrolls.
The private education sector experienced an increase of 18,200 workers while health care boosted employment by 12,000 workers during the month of July.
Leisure and hospitality added 27,000 jobs. The loss of 3,800 jobs in the performing arts and spectator sports area was made up by the gain of 29,400 jobs in bars and restaurants.
As for future job growth, Jim John, chief operating officer for the career network Beyond.Com in King of Prussia, Montgomery County, said he is seeing a slowing of hiring by small companies which had been adding employees for the last two years.
"They're taking a position of 'wait and see,' " he said.
Larger employers, such as Wal-Mart and Macy's, large construction companies and insurance companies such as AFLAC, Geico and Prudential, are all hiring, he said. Those companies had all cut staff positions and were running with fewer people than they generally need.
"You can only run the baseline staff so long and so hard until you have to start to supplement people," he said.
Mr. John said there are is a strong need for people in information technology and health care.
He doesn't expect to see hiring really pick up much until about March 2013.
First Published August 4, 2012 12:00 am