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July US Job Growth Lower Than Expected - 2004-08-06

The U.S. economy added only 32,000 jobs in July, far fewer than the 250,000 that had been anticipated. Analysts see the July figures as evidence that the pace of economic growth is slowing.

The July numbers were a disappointing surprise to financial analysts, most of whom were confident figures would show that at least 200,000 jobs had been added. The stock market, which has been down because of the steady rise of oil prices, opened sharply lower on the news.

Stuart Hoffman, chief economist at PNC. Financial, a large bank in Pittsburgh, Pennsylvania, is among the analysts caught off guard by the jobs report.

"There was far less job growth in the month of July than anyone expected," he said. "And when you look back on the job growth in May and June, they shaved it back a little, as well. So for three months in a row we have grown jobs, but the pace has slowed down, and the average of the last three months is back under 150,000 and that's just not good enough."

The Labor Department report shows that the U.S. jobless rate actually declined in July to 5.5 percent from 5.6 percent in June. Analysts say that decline reflects the large number of unemployed who stopped actively looking for jobs, and, therefore, are not included in the jobless statistics.

Greg Valliere, an analyst at Schwab Capital Markets in Washington, blames higher oil prices for the slow down in the pace of job creation. "I think, if we've underestimated one thing throughout the summer, it's got to be oil," he said. "I think, it is having a much bigger impact on the average American and on hiring than we would have thought back on Memorial Day."

Oil prices have risen by one third since the beginning of the year.

At the White House, chief economist Gregory Mankiw stressed the year-long trend in job creation, rather than the disappointing July figures. "We're not satisfied with this morning's report at all," he said. "The president has said many times that he won't be satisfied, until every American who wants a job can find a job, but this economy overall is heading in the right direction."

Mr. Mankiw says the economy has created 1.5 million jobs in the past year.

The state of the economy and unemployment are key issues in the presidential campaign. President Bush's Democratic challenger, Senator John Kerry, has criticized the Bush administration for job losses during his term and promised incentives for corporations to keep and create more jobs at home.

There will be two more monthly employment reports released before the presidential election in early November.