Payrolls Increase, but Jobs Report Raises Concerns

By Toni Vranjes

August 2, 2013

The U.S. economy created 162,000 jobs in July, the Labor Department reported today. However, there was still plenty of disappointing news from the job market.

The overall employment numbers fell short of economists’ expectations of 185,000 jobs, and many of the new jobs are relatively low-paying. Also, the report shows that the economy created fewer jobs in May and June than previously reported.

down_arrow_7_pt_4And though the jobless rate fell from 7.6 percent to 7.4 percent last month, it’s important to look beyond the headline numbers. In an analysis of the July report, IHS Global Insight economist Douglas Handler wrote that the labor force declined by 37,000, driving the drop in the jobless rate. Many of the labor-force dropouts are people with a bachelor’s degree or higher, he added.

“It’s unclear what individuals’ motivations are for dropping out of the labor force; but discouragement at finding a job certainly doesn’t support faster economic growth,” Handler wrote. “The fact that those with college degrees contributed so significantly to this result bears watching over the next few reports.”

Much of the job creation came from retail trade, as well as leisure and hospitality. Last month, retail trade gained 47,000 jobs. Also, employment increased by 38,000 in “food services and drinking places,” which is within leisure and hospitality.

In a recent report, Westwood Capital Managing Partner Daniel Alpert noted that these areas of the economy are expanding, but the jobs don’t pay very well. Retail trade and leisure and hospitality – along with administrative and waste services – are the three lowest-wage sub-sectors of the economy, Alpert wrote. In the second quarter, almost 70 percent of the jobs created were in those three areas, he added.

Meanwhile, the Labor Department revised job growth downward for May and June. The revised figures show 176,000 new jobs in May, instead of 195,000. For June, the new figure is 188,000 jobs, down from 195,000.

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