3 August 2001, 17:37 US July jobs won't deter Fed from 25-bp cut in Aug: analysts
--Better-than-expected jobs curb odds of Fed cut after Aug
--July jobs data show US labor mkt starting to bottom: analysts
By Mariko de Couto and Regina Schleiger
New York, Aug. 3 (BridgeNews) - The July jobs report continued to show
a slackening U.S. labor market with the near-term outlook expected to
center on weakness, but economists say that employment conditions may have
already started to bottom. For insurance, the Federal Reserve will likely
ease the federal funds rate by 25 basis points this month, economists
said. While it's too early to tell for sure, the odds of a subsequent cut
is curbed for now as deterioration in employment may not be as bad as
feared, they said.
Non-farm payrolls fell 42,000 in July which ended up to be not as
large as the consensus forecast of a 60,000 drop. The May payrolls number
was revised upward slightly to down 93,000 from the original reading of a
114,000 decline.
The surprise in the July report was the flat reading in the jobless
rate which stood at 4.5% again in July after June. The consensus forecast
had called for a rise to 4.6%, with many economists forecasting 4.7% in
July.
Economists attribute the static jobless rate to the rise of 447,000 in
employment in the monthly household survey. At the same time, the labor
utilization pool which shows the number of those unemployed but not
actively seeking work, fell to a seasonally adjusted 10.9 million in July
from 11.0 million in July.
Despite the static reading in the unemployment rate in July,
economists are certain this number will continue its climb the next
several months to peak at or just above 5.0%.
The lagged nature of this number will keep the rate climbing even
after the economy starts to show fledgling signs of recovery, economists
said.
Meanwhile, the manufacturing sector remained the flimsiest sector
again. A total of 49,000 factory jobs were lost in July.
And the weakness also seemed to have emerged in the once sturdy
services sector which registered a 23,000 drop in jobs in July.
The weakening corporate sector also seems to continue to force
companies let go of temporary workers which fell 42,000 in July.
The reading for average hourly earnings was right on consensus at up
0.3% and the average workweek was also as expected in July at 34.3 hours.
(Story .4790)
Christopher Low, chief economist at First Tennessee Capital Markets,
expects the Fed to ease again at the policy meeting on Aug. 21.
"The job market is showing signs of bottoming but the situation is
weak enough...that they will go ahead and cut rates in August for
insurance," he said.
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