US un­em­ploy­ment falls to 7-year low, but wages are flat

The Covington News - - BUSINESS - CHRISTO­PHER S. RU­GABER news@cov­news.com

U.S. un­em­ploy­ment fell to a seven-year low of 5.3 per­cent and em­ploy­ers hired at a solid pace in June, but other gauges of the job mar­ket drew a bleaker pic­ture: A wave of peo­ple stopped look­ing for work, and pay­checks failed to budge.

The fig­ures re­leased Thurs­day cap­ture the per­sis­tently un­even na­ture of the re­cov­ery from the Great Re­ces­sion.

The job mar­ket "re­mains con­sis­tent with a two-steps-for­ward, one-step-back ex­pan­sion the U.S. econ­omy finds it­self in," said Scott An­der­sen, chief economist at Bank of the West.

The econ­omy gained 223,000 jobs last month, and un­em­ploy­ment edged down from 5.5 per­cent in May, the La­bor Depart­ment re­ported.

That is the low­est job­less rate since April 2008, when it was 5 per­cent. It even­tu­ally soared to 10 per­cent in late 2009 af­ter the re­ces­sion had done its worst.

Yet un­em­ploy­ment dropped this time mainly be­cause many peo­ple out of work ap­par­ently got dis­cour­aged and gave up look­ing for a job. The gov­ern­ment doesn't count peo­ple as un­em­ployed un­less they're ac­tively search­ing.

In fact, the pro­por­tion of Amer­i­cans work­ing or look­ing for work slipped to a 38-year low.

At the same time, wages have stalled, ris­ing just 2 per­cent over the past 12 months.

The mixed data sug­gest the Fed­eral Re­serve may put off plans to raise short­term in­ter­est rates and end the stim­u­lus ef­fort that be­gan in 2008. Most econ­o­mists had ex­pected the Fed to make its move in Septem­ber.

"Af­ter this re­port, I think it would make sense to wait un­til De­cem­ber to start that slow rate in­crease," said Tara Sin­clair, chief economist at the jobs site In­deed and a pro­fes­sor at Ge­orge Washington Univer­sity.

A Fed in­crease would lead to higher rates for mort­gages, auto loans and other bor­row­ing.

The slug­gish wage growth sug­gests that many em­ploy­ers see no need to raise pay to at­tract or re­tain work­ers and that there are more peo­ple avail­able for hire than the un­em­ploy­ment rate would in­di­cate.

Some quirks of the jobs re­port might also ex­plain why wages stag­nated last month. The gov­ern­ment's sur­vey ended rel­a­tively early in the month on June 12. As a re­sult, it might have ex­cluded some twice-monthly pay­checks, noted John Sil­via, chief economist at Wells Fargo.

Another sour note in the re­port was that con­struc­tion com­pa­nies failed to add any jobs in June. Man­u­fac­tur­ing gained just 4,000 po­si­tions. But health care added 53,000, and re­tail­ers 33,000.

Still, over the past three months, hir­ing has av­er­aged a ro­bust 221,000 per month. That shows that some em­ploy­ers are con­fi­dent about con­sumer de­mand for their goods and ser­vices in the com­ing months.

Pa­trick Cimerola, se­nior vice pres­i­dent of hu­man re­sources at Choice Ho­tels, the cor­po­rate par­ent of such chains as Qual­ity Suites and Com­fort Inn, said the com­pany is rais­ing pay and adding perks to hire work­ers in mar­ket­ing, in­for­ma­tion tech­nol­ogy and fi­nance.

"More peo­ple are trav­el­ing, be­cause more peo­ple have dis­pos­able in­come," he said. "And we be­lieve that will con­tinue."

Amer­i­cans are, in fact, spend­ing more than they did ear­lier this year, when the mis­er­able win­ter caused the econ­omy to con­tract. The Con­fer­ence Board said this week that con­sumer con­fi­dence reached the sec­ond-high­est level since the re­ces­sion.

Auto sales and home sales have jumped to their high­est lev­els since 2007. And the econ­omy is ex­pected to grow at a 2.5 per­cent an­nual rate in the sec­ond quar­ter.

Yet Greece's debt cri­sis and a slow­down in China could also weigh on U.S. growth this year.

More peo­ple are trav­el­ing, be­cause more peo­ple have dis­pos­able in­come, and we be­lieve that will con­tinue."

— Pa­trick Cimerola, se­nior vice pres­i­dent of hu­man re­sources at

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