Employment Growth Up, But Economy Still Spinning Its Wheels

Though the report turned out better than expected, July's employment numbers still count as mediocre.

The report turned out better than expected, but July’s employment numbers still count as mediocre. Though a net of 163,000 jobs were created across a reasonably wide range of businesses, both the number of unemployed persons (12.8 million) and the unemployment rate (8.3 percent) were essentially unchanged in July, according to the Bureau of Labor Statistics. Both measures have shown little movement so far in 2012.

In fact, the same has been true since the worst of the recession ended. Since the beginning of this year, employment growth has averaged 151,000 per month, about the same as the average monthly gain of 153,000 in 2011. For the first seven months of 2012, the economy added 1.06 million jobs, which will total 1.9 million if the pace continues through to the end of the year. Definitely better than nothing, but not enough to do much more than keep the economy from sliding back into recession.

All together, 172,000 private-sector jobs were created in July, with 9,000 public-sector jobs lost. Employment in professional and business services increased by 49,000 in July, while manufacturing employment rose in July by 25,000, with nearly all of the increase in durable goods manufacturing. Employment also increased in healthcare and wholesale trade, according to the BLS.

ISM reports ups and downs

On Friday, the Institute for Supply Management reported mixed trends for July. Its non-manufacturing index was 52.6 percent last month, 0.5 percentage points higher than the 52.1 percent reading in June, which indicates continued growth during the month at a slighter faster rate in the non-manufacturing sector. The non-manufacturing business activity index, at 57.2 percent, was 5.5 percentage points higher in July than June, reflecting growth for the 36th consecutive month.

The ISM also said that the new orders index increased by 1 percentage point to 54.3 percent for the month. On the other hand, the employment index decreased by 3 percentage points to 49.3 percent, indicating contraction in employment for the first time since December 2011.

Earlier in the week, the ISM reported that economic activity in the manufacturing sector contracted in July for the second time since July 2009, with the PMI coming in at 49.8, a shade below the expansion/contraction threshold of 50. The index barely changed from June, when it was 49.7.

RR activity also mixed

The Association of American Railroads, in its measure of U.S. economic activity, likewise reported mixed indicators. U.S. rail carloads originated in July 2012 totaled about 1.1 million, down 0.7 percent compared with July 2011. Intermodal volume in July 2012 was about 946,000 trailers and containers, up 5.6 percent compared with July 2011.

“Carloads of some of the more economically sensitive commodities, such as lumber and wood, steel, and autos, gave us a mixed message in July,” AAR senior vice president John T. Gray noted in a press statement. “While lumber related to home construction remained very positive, other manufactured goods either grew more slowly than they have been or actually fell in July.”

Wall Street seemed relieved about the jobs numbers on Friday, and maybe just by the lack of bad news from the euro-zone for a few days, and ended up strongly. The Dow Jones Industrial Average gained 217.29 points, or 1.69 percent, while the S&P 500 was up 1.9 percent and the Nasdaq advanced an even 2 percent.