US employers added fewer jobs in July but the gains were enough to lower the unemployment rate to a more than four year low of 7.4%, a good sign in an otherwise lacklustre report.
The Labor Department said today that employers added 162,000 jobs, the fewest since March, and that the unemployment fell from 7.6% in June as more Americans found jobs.
But the US economy created 26,000 fewer jobs in May and June than previously estimated.
Americans worked fewer hours in July, and their pay dipped, suggesting that weak economic growth may be making businesses cautious about hiring.
However, US jobs growth for the year still remains solid and the economy has created 200,000 jobs a month since January. But the pace has slowed in the past three months to 175,000.
The US Federal Reserve will pay particularly close attention to the July employment data as it decides whether to scale back its $85 billion a month in bond purchases later this year. Weaker hiring could make the Fed hold off on tapering at its September meeting.
However, economists noted that the drop in unemployment, along with steady hiring gains over the past year, could be enough to convince the Fed that the job market has made significant gains.
Revisions showed employers added fewer jobs in the previous two months: May's job growth was downgraded to 176,000, below the 195,000 previously estimated, while job gains in June were lowered to 188,000 from the 195,000 reported last month.
The job gains in July were mostly in lower-paying industries, such as retail, hotels and restaurants. But some were better-paying positions as manufacturing added 6,000 jobs, driven by strong gains at car plants. Those were the first job gains at US factories since February.
Jobs in professional services such as finance, accounting and information technology also increased last month.
The US economy grew at a 1.7% annual rate in three months from April to June, the government said earlier this week. While that was an improvement over the previous two quarters, it is still far too weak to rapidly lower unemployment.
But recent data has suggested that the economy could strengthen in the second half of the year. A survey yesterday showed that factories increased production and received a surge of new orders in July, propelling the fastest expansion in more than two years.
The survey, by the Institute for Supply Management, also showed that the housing recovery is spurring more output by lumber companies, furniture makers and appliance manufacturers. Businesses have ordered more industrial machinery and other equipment for four consecutive months. Europe's troubled economies are showing signs of recovery, potentially a lift to US exports.
US car makers also reported their best sales since the recession, a sign that Americans are confident enough in their finances to make large purchases. Car sales rose 14% in July from 12 months earlier to 1.3 million.
Healthy sales have encouraged more hiring by Ford Motor and the company said last week that it will hire 800 salaried professionals this year, mostly in areas such as information technology, product development and quality control.
US consumer spending up 0.5% in June
Meanwhile, US consumers increased their spending in June at the fastest pace in four months even though their income growth slowed.
The Commerce Department said consumer spending rose 0.5% in June compared with May, when spending was up 0.2%. It was the best gain since a 0.7% rise in February. But income growth slowed to a 0.3% rise in June, weaker than May's 0.4% gain.
The hope is that strong consumer spending will help boost a lacklustre economy to stronger growth in the second half of this year. But for that to happen, economists say income growth needs to accelerate.
Spending on non-durable goods was up 1.3%, partly reflecting rising petrol prices, while demand for durable goods rose 0.8%, reflecting strength in car sales.
