Pace of job growth weakens in July

WASHINGTON -- The pace of job growth weakened in July, and the average work hours and earnings of employees dipped as well last month from June, the government said Friday in a report that ended a string of encouraging economic news.

The Labor Department said the economy added a moderate 162,000 net new jobs in July, led by gains in lower-paying retail and restaurant businesses.

That was below analysts’ expectations for about 185,000 jobs and down from each of the prior two months, even after the government revised lower the job gains for June to 188,000 and for May to 176,000.

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The nation’s jobless rate, however, fell to 7.4% in July from 7.6% in June. While that was the lowest rate since December 2008, the monthly drop was not entirely for the right reason. Although more people were working last month compared with June, some people left the labor force, contributing to the lower unemployment rate.

The weakening pace of job growth muddles the outlook for the widely expected tapering of the Federal Reserve’s stimulus in September. Prior to this report, job growth was averaging about 200,000 a month this year, a solid if not spectacular pace. But with the latest month and the revisions earlier showing job growth having slowed, the Fed may be more reluctant to reduce its bond-buying stimulus at its next policy meeting.

While unexpected, the latest report reflects the slow economic growth in recent quarters. Earlier this week, the government reported that the economy barely grew in the fourth quarter of last year and expanded by just 1.1% in the first quarter. Economic growth picked up in the second quarter to an annualized rate of 1.7%, a still sluggish rate.

Analysts expect the momentum to build in the second half of this year as the drag from the federal spending cuts under the so-called sequestration fades and the economy benefits from a recovering housing market. But the latest jobs report was disappointing, especially in light of recent signs of an improving global economy and the resilient job creation earlier this year despite the sequestration and higher income and payroll taxes at the start of 2013.

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The ranks of involuntary part-time workers also continued to tick higher last month, which analysts believe is directly related to the sequestration cuts that have forced employees to take furlough days. The government considers part-time those who put in less than 35 hours a week.

For all private-sector workers, the average workweek dipped by 0.1 hour last month to 34.4 hours. Average hourly earnings, meanwhile, edged down 2 cents to $23.98 after a 10-cent jump in June.

There was little change in jobs over the month in construction and manufacturing, and hiring in the healthcare sector also paused last month.

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