US job growth slows in July

The number of jobs outside the farming sector increased by 162,000, the Labour Department said on Friday.

That was below the median forecast in a Reuters poll of 184,000. Compounding that miss, the government also cut its previous estimates for hiring in May and June.

At the same time, the jobless rate fell two tenths of a point to 7.4 per cent, its lowest in over four years. Gains in employment fuelled some of that decline, but the labour force also shrank during the month, robbing some of the lustre from the decline in the unemployment rate.

The data reinforces the view that the job market is inching towards recovery, with the broader economy still stuck in low gear.

“The US economy is grinding along for the better, but it’s going to be a long and slow grind,” Tanweer Akram, an economist at ING US Investment Management in Atlanta, said ahead of the report.

The question is whether the pace of job gains is enough for the Fed to feel the US economy is ready to get by with less support. The US central bank currently buys $85 billion a month in bonds to keep borrowing costs low.

The stimulus programme has lowered interest rates, spurring growth in the country’s beleaguered housing market and boosting car sales. Fed Chairman Ben Bernanke said last month the US central bank would likely reduce the level of monthly purchases by the end of the year, and end them by mid-2014.

The growth in payrolls left the three-month average gain at 175,000. Many economists believe even hiring around that level could lead the Fed to trim its bond buying in September.

Friday’s report showed the average work week declined to 34.4 hours, while average earnings slipped 0.1 per cent.

Consumers increased their spending in June at the fastest pace in four months even though their income growth slowed.

Consumer spending rose 0.5 per cent in June compared with May, when spending was up 0.2 per cent, the Commerce Department reported on Friday. It was the best gain since a 0.7 per cent rise in February. Income growth slowed to a 0.3 per cent rise in June, weaker than May’s 0.4 per cent gain.

The hope is that strong consumer spending will help boost a lackluster economy to faster growth in the second half of this year. But for that to happen, economists say income growth needs to accelerate.

Orders placed with US factories rose to a record high in June, boosted by strong demand for airplanes, machinery and autos.

Factory orders rose 1.5 per cent in June compared with May, when orders had risen three per cent, the Commerce Department reported on Friday. The gains pushed total orders to a record $496.7 billion.

It was the second month that factory orders have been at an all-time high, surpassing the previous record set in June 2008. Demand for factory goods had plunged during the recession.