Employers Shed More Than 50,000 Jobs in July

GDP advances 1.9 percent in the second quarter.  The Bureau of Economic Analysis reported that real Gross Domestic Product grew at 1.9 percent seasonally adjusted annual rate in the second quarter of 2008.  The advance report also contained benchmark revisions to GDP figures over the previous three years, including downward revisions to GDP growth in the previous two quarters.  Notably, the revision showed that output in the fourth quarter of 2007 actually declined by 0.2 percent after incorporating more comprehensive housing data from the Census Bureau.

The report showed that net exports contributed significantly to GDP: real exports rose by 9.2 percent at an annual rate while imports declined by 6.6 percent.  The change in net exports reflects how the dollar has depreciated against other currencies, which makes foreign goods relatively more expensive when compared with U.S. goods.

The economic stimulus checks gave a boost to real personal consumption expenditures, which rose 1.5 percent in the second quarter following a 0.9 percent increase last quarter.  However, the benefits of the stimulus are decidedly short term in duration.  Given that personal consumption expenditures comprise around 70 percent of GDP, the demand-side picture is especially critical once the stimulus has been exhausted.

Labor market losses approach a half million jobs.  The Bureau of Labor Statistics released its Employment Situation report on Friday showing that payrolls declined by 51,000 jobs in July and the civilian unemployment rate jumped from 5.5 to 5.7 percent — the highest rate in 4 years.  (See Chart) July marked the seventh straight month of job losses bringing the total to 463,000 since the peak in December 2007.  A separate survey showed that initial claims for unemployment insurance hit a recent high of 448,000 for the week ending July 26.  Workers in the construction and manufacturing industries continue to be vulnerable to job cuts as those industries lost 22,000 and 35,000 jobs, respectively.  In addition, employers are cutting back on hours and pushing employees into part-time roles bringing the under-employment rate, which also includes marginally attached workers, to 10.3 percent.