Economy

US Unemployment Rate Falls to 3.9 Percent as Hiring Slows

One weak spot for economy, however, is the housing market

What to Know

  • U.S. employers added 157,000 jobs, slowing their hiring in July
  • The unemployment rate dropped to 3.9 percent from 4 percent
  • Employers added an average of 224,000 new workers in the first six months of this year, a faster pace than in 2017

Employers pulled back on hiring in July, but the job gains were still enough to lower the U.S. unemployment rate a tick to 3.9 percent from 4 percent.

Employers added 157,000 jobs last month, a modest gain, the Labor Department said Friday. That's below the 215,000 average for the first seven months this year, but economists said the decline will likely prove temporary.

Consumers are spending freely and businesses are stepping up their investment in buildings and equipment, accelerating growth. That's raising demand for workers in industries ranging from manufacturing to construction to health care. The economy expanded at a 4.1 percent annual rate in the April-June quarter, the strongest showing in nearly four years.

The smaller job gain likely reflected some one-time factors, analysts said. Local governments cut 20,000 jobs, the most in more than two years. Most were in education, suggesting some of the decline reflects the start of summer school holidays.

And sporting goods, hobby and toy stores shed 32,000 jobs, by far the most on records dating back to 1990. That is the result of the Toys R Us bankruptcy, economists said.

Excluding those factors, hiring in July would have been closer to the monthly average this year.

The government also revised hiring totals for May and June to show that another 59,000 jobs were added in those months.

"This job growth is nothing to be disappointed about, particularly at this stage of the recovery," said Martha Gimbel, director of economic research at job search website Indeed. The economy is now entering its tenth year of expansion, and hiring has actually accelerated this year compared with 2017, surprising most analysts.

Stocks rose moderately after the report was released. The Dow Jones industrial average increased 82 points in mid-day trading to 25,408.

Average hourly pay gains remained modest, increasing 2.7 percent from a year earlier, the same as the previous two months. That has puzzled Federal Reserve Chairman Jerome Powell and many economists. Typically, when unemployment has fallen below 4 percent in the past, wages have increased at a faster pace.

With rising gas prices pushing up inflation, Americans actually saw their inflation-adjusted pay decrease in the past year. Consumer prices rose 2.9 percent in June from a year earlier, more than the average wage gain.

One cloud on the horizon has been the Trump administration's trade fights with China, the European Union, Canada and Mexico. The White House has slapped tariffs on steel and aluminum and on $34 billion of imports from China, and several companies have hit U.S. imports with retaliatory duties.

Yet the trade fights didn't appear to impact hiring last month. Manufacturers, among the most directly affected by the import taxes, added 37,000 jobs, the most in seven months.

Manufacturers have likely benefited from oil and gas drillers nearly doubling their investment in drilling rigs and other structures this spring. That's boosted factory output of steel pipe and other drilling equipment. The new spending follows a 60 percent jump in oil prices in the past year.

Companies say they are struggling to find workers, with job openings higher than the number of unemployed for the first time in decades.

In response, many firms appear to be giving part-time workers longer hours. The number of part-time workers who would prefer full-time work has fallen nearly 13 percent in the past year and now stands at 4.6 million. That's the fewest in 11 years.

And the underemployment rate — which includes discouraged workers no longer searching for work, as well as involuntary part-time workers — dropped to 7.5 percent, the lowest in 17 years, from 7.8 percent.

Brian England, the owner of BA Auto, a car repair shop in Columbia, Maryland, would like to add another technician and an apprentice to his 18-member staff.

Yet auto repair work requires more technical skills than the past because of the increasing concentration of computers and electronics in newer cars. He also wants his mechanics to have teamwork skills because complex repairs can require more than one worker.

He has raised starting pay roughly 10 percent in the past two years, from $60,000 to between $65,000 and $70,000.

"The more you make an employee healthy and happy, the more that they're going to stay with you," England said.

Lower-skilled workers are also benefiting from companies' demand for labor. The unemployment rate for those without a high-school diploma fell to 5.1 percent, the lowest on record.

The economy is projected to grow at about a 3 percent pace for the rest of the year, which would likely mean that growth for all of 2018 would top 3 percent for the first time since 2005.

Copyright AP - Associated Press
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