The Dow added 217 points after the July Employment Report was released on Friday by the Bureau of Labor Statistics. Economists had forecast a 100,000 job gain, so investors were elated when the economy added 163,000 jobs. The unemployment rate rose a tenth of a point to 8.3%, basically staying in the same range it's been in all year.
The most job gains occurred in the following sectors:
- Leisure and hospitality -- 27,000 vs 10,000 jobs in June.
- Health care -- 19,100 after adding only 9,500 last month.
- Auto industry -- 12,800 vs 7,100 in June.
- Retail trade -- 6,500 jobs, after losing 3,200 in June.
Temporary help added 14,100 jobs, still quite a bit, but less than the 21,100 positions added last month. This could mean that employers are feeling a little more confident about the economy, enough to add more permanent payroll positions.
Government is still shedding jobs, but the pace is slowing. Only 9,000 local, state and Federal public jobs were lost, the same as in June but much less than the 79,000 government jobs lost in July 2011.
The unemployment rate rose a bit, from 8.2% (where it's been since March) to 8.3%. If jobs are being added, why would the unemployment rate rise? First, the unemployment report comes from a household survey, while the jobs report comes from a business survey. Therefore, the two reports don't always tie out. Second, the unemployment report is not quite as accurate as the jobs report. Therefore, most analysts pay attention to the trend reported by the business survey if it conflicts with the household survey.
The unemployment rate rose because the labor force dropped a bit. There are roughly the same number of people who were unemployed: 12.72 million vs 12.27 million in June. However, some people dropped out of the labor force, causing the unemployment rate to increase.
People drop out of the labor force for many reasons. Some are ill, while others have to care for sick relatives. In this recession, many people have decided to go back to school. However, another unfortunate reason is that people have become so discouraged by job prospects that they've given up looking for work. The BLS calls them discouraged workers, and in fact that number rose -- from 821,000 in June to 852,000 in July.
One other bit of good news is that there are 185,000 fewer long-term unemployed than last month. These are people who have been without a job for 27 weeks, but are still actively looking. Another encouraging sign is that more people are unemployed because they've returned to the work force, while fewer are unemployed because they lost a job. (Source: BLS, Employment Situation Summary )
What This Means for You
The employment picture is slowly improving. The areas that are improving fall into two general areas: low-skilled and low-paid, like restaurant and retail, and high-skilled and high-paid, like health care and auto manufacturing. If you can figure out a way to acquire the skills, you don't have to settle for a low-paid job. That's why so many people are taking advantage of the Federal government education loans to go back to school.
The fact that the jobs situation is improving means that the economy is fundamentally sound. The biggest problem is that businesses are waiting for the Federal government to take action one way or another to support economic growth. The large number of temporary jobs means that businesses need workers, but are afraid to add to their payroll. The fact that the temporary jobs number is declining a bit while permanent jobs are increasing indicates that some businesses are switching from expensive temporary services to permanent positions.
Congress is waiting until the after the election to tackle job growth strategies, tax cuts and government spending. Meanwhile, the economy could be doing a lot better. Share your opinion in What Causes Unemployment?
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