While the Labor Department released a report Friday morning showing a continued decline in employment in the month of July, the pace of job losses slowed by even more than economists had been anticipating. The unemployment rate also fell for the first time in over a year.
The report showed that non-farm payroll employment fell by 247,000 jobs in July following a revised decrease of 443,000 jobs in June. Economists had been expecting employment to fall by 325,000 jobs compared to the drop of 467,000 jobs originally reported for the previous month.
Lindsey Piegza, economic analyst for FTN Financial, said, A better than expected employment report coupled with upward revisions to the previous months reveals a discernable improving trend in labor market conditions.
The conversation now shifts from 'Will the recovery take hold?' to 'What kind of momentum will the recovery have going into 2010?' Piegza added.
Job losses continued in many of the major industries, although the report showed notable slowdowns in the pace of jobs losses in both the goods-producing and service-providing sectors.
Employment in the goods-producing sector fell by 128,000 jobs in July compared to a decrease of 223,000 jobs in June, while the service-providing sector lost 119,000 jobs versus a drop of 220,000 jobs in the previous month.
While employment in the manufacturing sector showed a relatively modest decrease of 52,000 jobs in July, the data may reflect seasonal distortions from the auto industry.
Meanwhile, the report showed a modest increase in employment in the education and health services sector, which added 17,000 jobs. Employment in the leisure and hospitality and government sectors also added 9,000 jobs and 7,000 jobs, respectively.
The Labor Department also said that the unemployment rate unexpectedly edged down to 9.4 percent in July from 9.5 percent in June. With the decrease, the unemployment rate fell for the first time since April of 2008.
The decrease surprised economists, who had been expecting the unemployment rate to edge up to a twenty-six year high of 9.6 percent.
Additionally, the report showed that average hourly earnings rose by 3 cents, or 0.2 percent, to $18.56 in July after coming in flat $18.53 in June.
Peter Boockvar, equity strategist for Miller Tabak, noted, As a result of the much better than expected July payroll number, the fed funds futures are now officially pricing in a 100 percent chance of a 25 basis point rate hike from the Fed by the January '10 meeting.