US employers shed 51,000 jobs in July
Saturday, 02 August 2008

AFP, WASHINGTON - US employers shed 51,000 nonfarm jobs in July marking a seventh straight month of job cuts as the economy struggles for momentum, a Labor Department survey showed Friday.

Despite fresh job losses, the monthly government snapshot was not as bad as feared as most economists had predicted 75,000 jobs would be lost during July.

The national unemployment rate meanwhile ticked up to 5.7 percent -- striking its highest level in four years -- from 5.5 percent in June, a shade higher than most forecasts.

Employers cut jobs for a seventh straight month as the world's largest economy continues to be buffeted by a nagging housing market slump, a widespread credit crunch and high crude oil prices.

"We're not seeing the level of layoffs you tend to see in a recession at this point. What we are really tending to see is a lack of new hiring," said Scott Anderson, an economist at Wells Fargo.

The economic slowdown and rising fuel costs have had a big impact on major airlines and automakers who have been forced to slash costs by shedding workers this year.

Northwest Airlines announced it would be slashing 2,500 jobs last month while automaker Chrysler said it planned to cut 1,000 white-collar posts by the end of September.

June's job losses were revised down to 51,000 posts compared with an original estimate of 62,000 while May's employment cuts were notched back to 47,000 from an original tally of 62,000.

A total 463,000 jobs have been lost in the economy since the start of the year.

The bleak job snapshot was released ahead of a looming interest rate meeting of the Federal Reserve set for Tuesday. The central bank is widely expected to keep its federal funds rate firmly anchored at 2.0 percent.

John Lonski, a chief economist at Moody's Investor Service, expects the Fed to keep rates unchanged because it is more worried about inflationary pressures than some of the other problems roiling the economy.

"(The) Fed will do nothing next week. The Fed will keep fed funds at 2.0 percent, voice its concern about the longer term inflation threats from commodity prices," Lonski said.

Anderson at Wells Fargo agreed that the Fed would likely keep its gunpowder dry next Tuesday, partly because of the mixed signals being thrown off by the economy.

"We know we're in a soft economy, perhaps it's going to soften further over the next six months, but (there are) not any crystal clear signals that we're heading into a deep recession or anything nearing that," Anderson said.

Other economists backed up that stance.

"For the Federal Reserve, the news should reinforce a wait-and-see approach to policy," said Stephen Gallagher, an economist at Societe Generale.

The housing downturn continued to have a big impact on the job market during July as the construction industry shed 22,000 jobs.

The manufacturing sector also showed continued signs of retrenchment as manufacturers cut 35,000 jobs and the retail industry shed 17,000 posts. Professional and business services companies cut 24,000 positions.

Although most industries cut jobs last month, there were a few bright spots in the survey, as the education and health care sector created 39,000 new positions.

Government hiring created 25,000 new jobs while the leisure and hospitality industry added 1,000 new posts to its payrolls.

The report also showed that average hourly wages rose 0.3 percent during the month to 18.06 dollars.

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