Wall Street Encouraged by Job Growth in June
By VIKAS BAJAJ
The American economy added 146,000 jobs in June, the government said today in an employment report that showed smaller growth than economists had expected but still gave them reason to be encouraged.
The unemployment rate fell to 5 percent, a level last seen in September 2001, from 5.1 percent in May. But a part of that decline could be the result of 84,000 workers' joining the ranks of discouraged workers who said they had stopped looking for work because of poor job prospects.
Economists, who had forecast the creation of 200,000 jobs, said the June report indicated that the economy continued to expand at a solid, if not exuberant, pace. They also noted that the Bureau of Labor Statistics had revised the May and April data to show that job creation rose by a total 44,000 in those months.
"This number is even stronger than I was expecting, because you got a 44,000 increase in jobs that we didn't know about," Anthony Chan, a senior economist at J.P. Morgan Asset Management, said. The report "understates the true strength of the labor market," he said.
Wall Street appeared pleased. The Dow Jones industrial average was up 130.90 points, to 10,433.19, in early afternoon trading. The Standard & Poor's 500-stock index was up 12.37 points, to 1,210.24, and the Nasdaq composite index was up 24.34, to 2,100.
Mr. Chan said the unemployment report would also have a positive impact on consumer confidence, because the public would see the lower unemployment rate as a sign that things are getting better. "That's a headline that consumers watch," he said.
The report showed that professional and business service employment grew by a robust 56,000 jobs. The construction industry, which has benefited from the nation's housing boom, added 18,000 jobs for the month and 282,000 jobs in the past year. And health care employment rose by 25,000.
But there was weakness at the nation's factories, which shed 24,000 jobs, far exceeding the loss of 5,000 jobs that economists had predicted. Much of the decrease came from the automobile industry, which shed 18,000 jobs as it slowed or temporarily halted production lines to work off excess inventory. General Motors, quickly followed by Ford and Chrysler, has also extended deep employee discounts on its cars to the public.
The economy has lost 96,000 factory jobs since August 2004 and manufacturing employment has been at its lowest levels since the late 1950's.
Mr. Chan said the worst may be coming to an end in that sector because recent manufacturing surveys by the Institute for Supply Management and others indicated that factories were increasing production. The Commerce Department reported earlier this week that new factory orders were up 2.9 percent in May.
But other economists are not so sure. They note that manufacturing and the overall economy still do not show signs of the kind of robust growth needed for companies to hire large numbers of people.
Today's report, for instance, showed that the average hours of work (33.7 a week) and pay ($16.03 an hour) were little changed from the month before or early this year. Rising work hours and wages are early signs that companies plan to, and need to, hire more people in the coming months.
"Going forward you are going to see continued moderate job growth: only hiring when you absolutely have to," said Joshua Shapiro, chief United States economist at MFR Inc. in New York.
That temperate forecast is likely to influence Federal Reserve's policy makers when they meet on Aug. 9.; on June 30, the Fed raised short-term interest rates a quarter, to 3.25 percent.
"They will keep their soft-touch approach," Mr. Chan said.
Policy makers are trying to slow the economy just enough to ensure that it does not overheat but not so much that they stall growth, Mr. Chan said.
|
