September 7, 2012
LIA Monthly Economic Report - Recovery continuing at a subpar pace
By: Dr. Pearl M. Kamer, LIA Chief Economist
The economic recovery is continuing at a subpar pace. There has been some good news in recent months. Employers added the most jobs in five months in July. Consumers spent more in July following three months of declines and August sales figures were also relatively strong. Inflation remains contained and exports have been resilient despite slowing economic growth in Asia and recession in Europe. Recent GDP revisions revealed that the U.S. economy grew at a 1.7% annual rate in the April-through-June quarter and most analysts expect a 2% growth rate for the remainder of this year. The economy requires a 2.5%-to-3.0% growth rate to substantially reduce unemployment.
U.S. employers added 163,000 payroll jobs in July. Private-sector growth of 172,000 jobs offset a loss of 9,000 government jobs. Although job growth is not as strong as it was at the beginning of the year, the job market is not deteriorating as it was in recent months. Some of July's job gains may reflect the fact that there were fewer summertime shutdowns than usual at the nation's auto plants. This temporary factor may have artificially inflated the July job figures. Therefore, it remains to be seen whether July's gains can be sustained in August. Increases in worker productivity are continuing to dampen job growth. U.S. worker productivity grew at a 1.6% annual rate in the second quarter of this year, reversing the 0.5% productivity decline in the first quarter. Rising productivity, defined as output per hour worked, allows companies to get more from their current workforce and to delay hiring new workers.
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