Another Sign of an Economic Recovery
By Zarana on Wednesday, August 12 2009
The U.S. unemployment rate fell in July for the first time in 15 months as employers cut far fewer jobs than expected, giving the indication yet that the economy was recovering from a worst recession since great depression.
The pace of U.S. job losses slowed more than forecast in July and the unemployment rate dropped for the first time in more than a year to 9.4%, which was 9.5% in June. In addition, a net total of 247,000 jobs were lost last month, the fewest in a year. That compares with 443,000 jobs that disappeared in June.
Analysts had expected nonfarm payrolls to fall by 320,000 in July and the jobless rate to hit 9.6%. The forecast was made earlier this week before other jobs data, including weekly jobless claims, prompted some analysts to lower their predictions for job losses. However, The White House said it still expected the unemployment rate to hit 10% this year. The post-World War II high was 10.8% at the end of 1982, when the country suffered through a severe recession.
The easing in the unemployment rate could have been the result of the labor force shrinking by 422,000 in July, far more than the 155,000 decline in June, suggesting some jobless workers may have given up looking for work. While employers cut fewer jobs than forecast, unemployment remains stubbornly high, meaning households have less income to spend and little borrowing capacity.
The U.S. Labor Department reported that worker productivity surged 6.4% in the second quarter of 2009 as measured from a quarter earlier at an annualized rate. Aside from the fact that the figure was the best in six years, it also indicates the American economy is returning to growth.
The Commerce Department reported that U.S. gross domestic product in July shrank at a better-than-forecast 1% annual pace in the second quarter after a 6.4% drop in the prior three months.
With companies feeling a bit better about the economy's prospects and their own, they boosted workers' hours in July. The average work week rose to 33.1 hours, after having fallen to 33 hours in June, the lowest on records dating to 1964.
Also employers bumped up wages too. Average hourly earnings rose to $18.56 in July, up from $18.53 in June. Average weekly earnings, which fell in June, rose to $614.34. Those gains raised hopes that consumers will feel more confident and more inclined to spend in the months ahead, thus helping the recovery.
Moreover, there isn't any part of the economy that hasn't shown some slowing in deterioration. U.S. stocks rallied on the hopes of the economic revival, where the Dow Jones industrial average ended up 1.2% at 9,370.07, also the US dollar moved up.