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US Economy Adds 215K Jobs in July

Mil Arcega, VOA News

Yet more signs of an improving job market. The U.S. Labor Department says employers added 215,000 jobs last month.

That’s the third consecutive month of job gains above 200,000 following weaker than expected job growth earlier in the year. While the unemployment rate held steady at 5.3 percent, analysts say the July job gains increase pressure on the Federal Reserve to start raising interest rates soon.

As job reports go, July turned in a solid performance – with white collar jobs in retail, business services and health care leading the way.

Gad Levanon, managing director for economic outlook at the Conference Board, says that’s a good development that could ultimately lead to higher wages.

“The slack in the labor market is evaporating and we are getting to a tighter and tighter labor market which I think is good for employees, and at some point wages will accelerate. They have a better chance of finding a job that they like, so overall it's a good development," said Levanon.

Average hourly wages rose five cents from the previous month – up 2.1 percent from the same time last year. But you wouldn’t know it based on the reaction on Wall Street.

Stock prices on Wall Street slumped in early trading, but mostly because the July job numbers add pressure on the U.S. central bank to start raising interest rates. If the job gains continue next month – the Fed may have little choice – says bureau chief Mark Hamrick – speaking to VOA on Skype.

"Fed officials like to talk about the fact that they are data-dependent, and, if we can hold them to their word on that, I think they will wait until the very last piece of data comes in before they decide to raise interest rates, but I do think it’s very much a possibility," said Hamrick.

Both analysts we spoke with predict an interest rate hike before the year ends.

"I think it makes it more likely that it will happen in September," said Levanon.

The Fed has kept the interest it charges other banks near zero since 2008 to bolster business and consumer spending. A September rate hike would mark the first increase in nearly a decade.

US Economy Advanced Faster at End of 2013

VOA News

The U.S. economy grew slightly faster than first thought to end last year.

The Commerce Department reported Thursday the American economy, the world's largest, advanced 2.6 percent in the October-to-December period, up from an earlier estimate of 2.4 percent. The agency said consumer spending, which accounts for 70 percent of the U.S. economy, rose at its fastest pace in three years.

But fourth quarter growth was slower than the 4.1 percent growth in the July-September quarter. Analysts say the economy likely slowed even further in the first three months this year, perhaps to two percent.

The U.S. economy has been buffeted by an unusually cold and snowy winter, slowing factory production and keeping consumers away from shopping malls. But most U.S. economists are predicting three percent growth for 2014.

That is higher than the weak 1.9 percent recorded in 2013, which was down from 2.8 percent in 2012.

Unemployment claims decline

In a separate report, the government said the number of first-time claims for jobless benefits dropped 10,000 last week to 311,000, the lowest figure since late November.

The decline in unemployment compensation claims is a signal that companies are cutting the number of layoffs and that could lead to more hiring. The U.S. jobless rate has fallen since the depths of the U.S. recession in 2009, but at 6.7 percent in February is still higher than the historical level below six percent.

Report Says Recurring Financial Crises Have Hurt US Economy

VOA News

A new economic analysis has concluded that the U.S. has significantly damaged its economy over the last several years by lurching from one financial crisis to the next.

The Macroeconomic Advisers research firm says that financial policy uncertainty and diminished consumer spending has annually cost the American economy, the world's largest, one percentage point of economic growth since late 2009.

The report said repeated down-to-the-wire government spending and tax decisions have resulted in more than 2 million lost jobs and have pushed the U.S. unemployment rate six-tenths of a percentage point higher than it otherwise would be. Although it gradually has been falling, the U.S. jobless rate is still at an elevated 7.3 percent as the American economy struggles to regain strength from the depths of its worst economic downturn since the 1930s.

The author of the report, economist Joel Prakken, said Washington's long-running conflict over the role of government in American life has led to continual legislative disputes over spending and taxation policies.

"There's a dispute in Washington about the longer-run vision of the role of government in American society. And since no agreement can be reached on that long-run view, we're left with a laser-like focus on near-term fiscal policy because of the need on a regular basis to re-appropriate funds for the discretionary part of the federal budget," he said.

U.S. President Barack Obama, a Democrat, and his Republican opponents in Congress are facing twin financial crises at the moment. They are trying to reach an agreement on ending a 15-day partial government shutdown and increasing the country's $16.7-trillion borrowing limit by Thursday so the U.S. avoids defaulting on its financial obligations.

Prakken said the government shutdown already has cost the U.S. economy three-tenths of a percentage point of growth in the last three months of the year, and that failure to increase the debt ceiling would be calamitous. He said a short-term default would push the jobless rate to 8.5 percent and cost 2.5 million jobs, while a longer default would be even worse.

He said no one knows with certainty what might happen if the U.S. endures a large-scale default, but that the world economy and financial markets could be left in turmoil.

"It's a scary scenario, one we don't want to learn about first-hand. It's true that the results and these kind of estimates are speculative, but we don't want to find out," said Prakken.

The current Washington dispute over government spending priorities and increasing the U.S. borrowing limit follows a contentious debt ceiling dispute in August 2011 that slowed economic growth at the time and led one financial services firm to downgrade the U.S. credit rating.

At the end of last year, Obama and Congress engaged in a lengthy debate over tax rates that was settled at the last minute with taxes being increased on the wealthiest Americans.

US Economy Advances More Than Expected

VOA News

New reports show the U.S. economy is advancing at a faster pace than some analysts had predicted, but the country's central bank says it is not ready yet to trim its stimulus measures to boost growth.

The government Wednesday said the American economy grew by a 1.7 percent annual rate in the April-to-June period, compared to a newly calculated 1.1 percent pace over the first three months of the year.

The Federal Reserve described the country's expansion as modest. The second quarter growth was nearly twice what many economists had projected, with some saying it pointed to even more robust growth in the second half of the year.

After a two-day meeting in Washington, central bank policy makers said the Fed will continue its monthly $85 billion purchase of securities to pump more money into the economy, and keep its benchmark interest rate near zero.

Analyst Greg McBride of said there is no urgency for the Fed to scale back its asset purchases.

"We still have a slow-growth economy with high unemployment and low inflation. As a result, there's really nothing urgent that's going to prompt the Fed to scale back their stimulus anytime soon," he said. "What they've done instead is adopt kind of a wait-and-see attitude with more of the same in the meantime."

The Fed's asset purchases have been aimed at spurring the economy and boosting job growth, but the central bank said previously that as the economy improves, it is looking to curtail the program later this year and end it by mid-2014.

The government said the second quarter advance was fueled by more consumer spending, a growth in exports and expanding corporate investment. That offset reduced federal government spending after Washington failed to agree on a new budget plan and automatic cuts took effect in March.

In another report, the government revised last year's U.S. economic performance upward, saying the country's overall output moved ahead by 2.8 percent, up from the 2.2 percent figure it earlier posted.
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