US Jobless Figure Drops to Lowest Rate in Four Years — But It's Still Way Too High
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The US unemployment rate fell to its lowest level in more than four years last month, but the addition of 162,000 new jobs to the world's biggest economy was lower than expected.
Figures released in Washington showed that the pace of hiring eased slightly in July, following a slowdown in economic growth in the first half of 2013. The Labour Department revised down the number of jobs added in May and June, indicating the underlying fragility of the economic recovery.
Wall Street had been expecting a stronger report and analysts said the data might make the US Federal Reserve more wary about removing the stimulus provided by asset purchases and low borrowing costs.
The financial markets had been anticipating a rise of 184,000 in non-farm payrolls, the key measure of the health of the US jobs market. Analysts said it was also disappointing that employment in previous months had been revised down by 26,000, and that average weekly hours worked had fallen.
The unemployment rate dropped by 0.2 points to 7.4%, the lowest since the global recession was at its most intense in the winter of 2008-09. The report said, however, that part of the drop was due to some Americans leaving the labour market after giving up hope of finding work.
The Fed chairman, Ben Bernanke, has said there is "broad support" among colleagues for shutting down its bond-buying programme, costing $85bn (£55.8bn) per month, if the unemployment rate falls to 7%. The US is expected to reach that level around the middle of next year, and the Fed spooked markets last month when it said it might begin "moderately" tapering asset purchases by September.
The dismal jobs report indicated the underlying weakness in the American economy, according to economists.
Peter Morici, an economist and professor at the Smith School of Business of the University of Maryland, sent out a research note titled "another disappointing jobs report" and said: "Overall, the jobs count may be up but for most working families and recent college graduates the situation is grim. Adding in discouraged adults and part-timers who want full-time employment, the unemployment rate becomes 14%."
Joseph Brusuelas of Bloomberg LP gave a similarly dire evaluation, saying that 5 million more men over the age of 20 were unemployed now than before the recession started in November 2007. He called this "the real crisis that is brewing deep inside the US labor market for men entering the peak earning years that will carry long-term implications for the overall social and economic well-being of the country".
Brusuelas also pointed out that longer unemployment periods have made people unsuccessful in finding new jobs after they've lost a job.
"The average duration of unemployment is 35.6 weeks or roughly 8 months [and] has rendered some of these individuals unemployable in their former lines of work," Brusuelas said.
James Knightly, economist at ING bank, said the markets had been hoping for a stronger report after upbeat US GDP data earlier in the week, which saw the economy grow by 1.7% in the second quarter.
He said it appeared to have "taken the wind out of the sails of those heavily backing a September start to quantitative easing tapering. Additionally, wages fell 0.1% on the month, the first fall since last October. This takes the year-on-year growth in wages down to 1.9% and is not indicative of a tight labor market."