Rising joblessness deflates good news on payrolls

Employers picked up the pace of hiring in July but a rise in the unemployment rate and the exodus of 150,000 people from the workforce deflated the positive signals given by the report.

A survey of Employers showed 163,000 jobs were created last month, the most since February, the Labor Department said on Friday. The reading was higher than any forecast in a Reuters poll.

Following are some key details from the report:

* The unemployment rate, which is derived from a separate survey of households, rose to 8.3 percent. That will give Republican presidential hopeful Mitt Romney ammunition for his charge that President Barack Obama has not done enough to help the economy since the 2007-2009 recession. It also raises pressure on Federal Reserve to ease monetary policy. The household employment survey ran in the opposite direction as the establishment survey of employers. The household survey showed the number of people with jobs fell by 195,000. In another worrisome sign, the household survey showed the size of the workforce decreased by 150,000. To be in the workforce, a worker must be either employed or seeking work. The participation rate, a measure of the amount of people employed compared to the size of the workforce, fell to 63.7 percent from 63.8 percent.

* Other details in the report, however, pointed to some underlying strength in the labor market. Using non-seasonally adjusted data, employers added 1.83 million workers in the 12 months through July. That is up from 1.732 million added in the 12 months through June. Ahead of the report, economists at Deutsche Bank said a reading above 1.7 million would suggest the job market is healing. The Deutsche Bank economists think the Labor Department has been having trouble over the last three years adjusting its data for the spring and summer to regular seasonal swings. In a sign of potential problems in the government's seasonal adjustments, the Labor Department said the car industry had fewer seasonal layoffs than is typical in July.

* The report's showing that construction firms laid off 1,000 workers last month could be a sign that the overall numbers are still being distorted by temporary weather issues. Many economists think mild weather gave a temporary boost to hiring during the winter at the expense of spring and early summer. This has made it difficult to tell how much of a hiring slowdown since February has been due to temporary factors and how much was due to a real loss of steam in the economy. After a strong winter, construction jobs were weak over the spring. the weakness in July might be read as a sign that this weather distortion is still affecting the numbers.

[Source: By Jason Lange, Reuters, Washington, 03Aug12]

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