Hiring cools in July; jobless rate up By JEANNINE AVERSA, AP Economics Writer

Hiring cools in July; jobless rate up By JEANNINE AVERSA, AP Economics Writer
1 hour, 38 minutes ago



WASHINGTON - The nation's unemployment rate inched up to a six-month high of 4.6 percent in July as hiring simmered down. Workers' wages, meanwhile, grew modestly. Wall Street tumbled.

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The latest snapshot of conditions around the country, released by the Labor Department Friday, showed that new job creation has slowed. Employers increased payrolls by 92,000 last month, down from 126,000 in June. It marked the fewest add-ons in a month since February.

Hefty job cuts by the government were a big factor in the subdued employment picture. Jobs also were eliminated by construction companies, factories and retailers — in part reflecting the toll of the sour housing market and the struggles of the U.S. auto industry. Employment in health care, food services, architecture and engineering, computer design and in other industries expanded.

"There are some indications that the job market may be easing up a tad but the fundamentals still remain quite solid," said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group. "So for people looking for work there are still opportunities, but some areas are much more active in seeking workers than others," she said.

Even with the uptick from June's 4.5 percent, the current jobless rate is still low by historical standards. The lowest unemployment rate in a generation — 3.8 percent — was logged in 2000. In contrast, the rate topped 10 percent in the early 1980s.

July's jobless rate was the highest since January, when it also was 4.6 percent. The last time it was higher was August 2006.

The cooler hiring climate affected groups differently. The unemployment rate for Hispanics climbed to 5.9 percent in July, the highest since late 2005. However, the rate for blacks declined to 8 percent, the lowest in five months. Teenagers were still finding summer jobs. Their unemployment rate dipped to 15.2 percent, a four-month low.

A separate report showed that the service sector — an engine of the U.S. economy — lost momentum in July. The Institute for Supply Management's index dipped to 55.8, from 60.7 in June. Readings above 50 indicate expansion, while those below 50 indicate contraction.

On Wall Street, stocks slid. Investors — already wary by the latest economic news — were gripped by fresh fears of a credit crunch. The Dow Jones industrials plunged 281.42 point to close at 13,181.91.

The latest economic reports were consistent with analysts' forecasts that the economy will grow gradually — but not like gangbusters — through the rest of this year.

The new employment picture was weaker than economists had expected. They were expecting employers to add around 135,000 jobs in July.

"Although slightly lower than the previous month ... we still think of these as good, solid numbers," said Edward Lazear, chairman of the White House Council of Economic Advisers. The labor market, he said, has been a "shining beacon" even as the economy has made its way through a sluggish spell over the past year.

Average hourly earnings rose to $17.45 in July, and they are up 3.9 percent over the past 12 months.

Wage growth supports consumer spending, a major ingredient in healthy overall economic activity. Still, workers pinched by high gasoline and food prices may not feel their paychecks are growing as much as they'd like.

Many economists expect the Federal Reserve to hold an important interest rate at 5.25 percent next week, extending a more than yearlong breather for borrowers. Before that, the central bank had boosted rates for two years to thwart inflation. Fed Chairman Ben Bernanke and his colleagues still believe inflation is a potential threat to the economy. Out-of-control inflation shrinks paychecks, erodes purchasing power and eats into the value of investments.

Employment gains for May and June turned out to be slightly weaker than reported earlier. The economy added 8,000 fewer jobs in those two months combined than the government estimated a month ago.

In July, the government slashed 28,000 jobs, while all private employers added 120,000 new positions over the month. Thus, total employment — government and private payrolls — grew by a net 92,000.

Employers have been dealing with uncertainties created by a pattern of seesawing economic growth.

At the start of the year, the economy nearly stalled, growing at a pace of just 0.6 percent, the slowest in more than four years. The economy rebounded in the April-to-June quarter, logging a rate of 3.4 percent, the best in more than a year. However, growth in the July-to-September quarter is expected to slow to a pace of around 2.5 percent, according to some projections. By the end of the year, the jobless rate could climb close to 5 percent, analysts say.

Across the country, the time it took to find a job grew last month.

The average time the 7.1 million unemployed people spent in their job searches was 17.2 weeks in July, up from 16.8 weeks in June.

"It's the dog days of summer for job creation," said Richard Yamarone, economist at Argus Research.

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On the Net:

Employment report: http://data.bls.gov