News Releases

CHICAGO, IL--(Marketwired - Aug 2, 2013) -

• U.S. nonfarm payrolls rose less than expected
• Construction surprisingly shed jobs
• Aggregate weekly hours show weakness

The U.S. labor market continues to make steady but unremarkable progress, according to BMO Economics.

U.S. nonfarm payrolls ros e a less-than-expected 162,000 in July following a downwardly-revised 188,000 advance in June, putting it below the six-month average of 200,000. Stronger job growth reported in the household survey (227,000) and a lower participation rate reduced the unemployment rate from 7.6 percent to a 4 1/2-year low of 7.4 percent.

According to Sal Guatieri, Senior Economist at BMO Capital Markets, "Construction surprisingly shed jobs, though manufacturers boosted payrolls for the first time in five months, and the government added a thousand local level jobs. Weakness in the report was indicated by a 0.1 percent decline in aggregate weekly hours worked, as well as in hourly earnings, possibly related to the furloughing of thousands of defense workers."

Said Guatieri, "Aggregate weekly hours are flat from the second quarter, and will need to jump in coming months if third quarter GDP growth is to show a meaningful bounce from the second quarter 1.7 percent pace."

The "all in" jobless rate, which includes discouraged workers and part-timers who want longer hours, edged lower but remains elevated at 14.0 percent.

In a separate release, personal spending rose 0.5 percent in June, inflated by higher gasoline prices, and was up just 0.1 percent in real terms for a third straight month. This suggests little momentum heading into the current quarter after consumer spending slowed to 1.8 percent in the second quarter. Core prices rose more than expected, up 0.2 percent in the month and took the yearly rate off record-lows to 1.2 percent.

"While we still lean toward the Fed announcing a tapering of asset purchases in September, we will need to see a good bounce in August employment and in the economic data to get there," said Guatieri. "Although the unemployment rate has moved lower, the recent economic softness will raise doubts among policymakers about whether this progress can be sustained."