Unemployment rate edges up, job growth slows

updated 11:26 a.m. ET Aug. 3, 2007

WASHINGTON - Hiring cooled off in July, pushing the nation’s unemployment up to 4.6 percent, a six-month high.

The fresh snapshot of employment conditions around the country, released by the Labor Department Friday, also showed that new job creation slowed. Employers increased payrolls by 92,000 last month, the fewest add-ons in a single month since February.

Job losses in construction, manufacturing, retailing and by the government blunted gains in education and health care, professional and business services, and leisure and hospitality.

Even with the uptick from June’s 4.5 percent unemployment rate, the current jobless rate is still low by historical standards. Those with jobs, meanwhile, did see modest wage gains.

Ken Mayland, president of ClearView Economics, likened the new figures to a modest middle ground, saying the job market is “running not too hot and not too cold.”

Another report showed that growth in the service sector — an engine of the U.S. economy — also slowed 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.

CNBC video Jobs growth slows Aug. 3: Pimco portfolio manager Paul McCulley discusses the July jobs report and what it may mean for the Federal Reserve’s monetary policy, on CNBC Friday. CNBC

The latest batch of economic reports is consistent with analysts’ forecasts that the economy will grow gradually — but not like gangbusters— through the rest of this year. The economy has been coping with fallout from the sour housing market, problems with higher-risk subprime mortgages and troubles in the automotive sector.

The news comes as President Bush has been trying to counter weak public-approval ratings for his handling of the economy. Only 37 percent approve of his performance, close to a record low, according to a recent AP-Ipsos poll.

The new employment picture was weaker than economists expected. They were forecasting employers to add around 135,000 jobs in July and for the unemployment rate to hold steady at 4.5 percent. The new figures suggest the jobs climate wasn’t as robust as first thought at the start of the third quarter.

However, Edward Lazear, chairman of the White House’s Council of Economic Advisers, said the business appetite to hire “is still very strong.” The labor market, he said, has been a “shining beacon” even as the economy made its way through a sluggish spell over the last year.

Wages grew modestly.

Average hourly earnings rose to $17.45, a 0.3 percent increase from June. That matched economists’ expectations. Over the past 12 months, wages grew by 3.9 percent.

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 like.

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