US jobs growth at five-month high

09-08-2005

The US economy created 207,000 new jobs in July, the biggest gain in five months, according to official figures. At the same time, US unemployment remained steady at 5% for the second month in a row, continuing at a four-year low.

New positions were created in retailing, education, health services, finance and construction, the US Labor Department said.

By contrast, factories shed jobs for the second straight month.

Upwards revision

The 207,000 new jobs created in July beat market expectations for a total of 180,000.

At the same time, the Labor Department revised upwards its previous job creation figures for June and May.

June was increased from 146,000 to 166,000, and May from 104,000 to 126,000.

The health of the jobs market is vital for economic confidence in the US, with consumer spending remaining the biggest influence on American growth.

'Sustainable growth'

Analysts broadly welcomed the latest figures.

"This is a crystal clear indication that the labour markets are very healthy and it reinforces the notion that the economy is growing in a healthy, sustainable way," said Dana Johnson, chief economist at Detroit-based Comercia.

However, the growing labour market would likely lead to the US Federal Reserve continuing to raise interest rates to prevent inflationary pressures, Ms Johnson said.

The Fed has raised interest rates by one-quarter of a percentage point 10 times since June 2004.

It next meets on Tuesday and is widely expected to raise rates by that same amount again. The US base rate currently stands at 3.25%.

And some commentators point to a number of other employment statistics which suggest that there is still plenty of slack in the labour market.

Among them are wages which have stayed broadly static, and the proportion of adults employed or looking for work which is at a ten-year low.

Similarly, the length of time people remain unemployed is at a level last seen in the early 1990s.

BBC News

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