Despite Larger-than-Expected Jobs Numbers, U.S. Unemployment Rate Edges Up in July

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Researched by Industrial Info Resources (Sugar Land, Texas)--The unemployment situation in the U.S. has not improved much in 2012. After dramatic growth in 2011, things have stagnated as the overall economy has slowed down. Industrial spending remains strong, but it has not been enough to boost the hiring rate. About 163,000 jobs were created in July, the highest amount in five months, but the unemployment rate rose to 8.3% for the month, even as $11.6 billion worth of industrial capital and maintenance projects began construction activities.

Click on the chart to the right to view July construction starts by industry.

The private sector stepped up to the plate in July, creating 172,000 new jobs, which was a number that was drawn down by the loss of 9,000 governmental jobs, largely at the local government level. Manufacturing saw 25,000 jobs created for the month, but the big winner was the private service-providing sector which grew by 148,000 jobs. The prime drivers of jobs growth were the professional and business services sector, which added 49,000 jobs; the education and health services sector, which added 38,000 jobs; and the leisure and hospitality sector, which added 27,000 jobs.

Within the key manufacturing sector, the fabricated metal products sector added 5,200 jobs and the primary metals sector added 1,400 jobs, but the majority of the new jobs came from the volatile transportation equipment sector, which added 20,500 jobs during the month. This growth was driven by the automotive sector, which saw fewer seasonal layoffs as automakers decided to forgo their semi-annual maintenance programs, in many cases to boost production.

The struggling construction sector lost yet another 1,000 jobs during the month. The unemployment rate in this sector has remained the highest in the country, currently at 12.3%. While this is down from a year ago, when it topped out at 13.6%, the lack of growth in this sector has been a major problem. The collapsed housing market has been a major contributor to the problems facing the construction sector, and until the housing market rebounds in a significant fashion, job growth is unlikely.

Industrial construction starts have remained a bright spot in 2012 and have helped keep the unemployment rate from increasing at a much more rapid pace. July's construction starts numbers were lower than previous months, but overall for the year, industrial construction has been booming thanks to a weak winter. While grassroot construction has not been as prominent as in years past, companies are willing to invest in their facilities in 2012, and this is not likely to stop in the coming months.

The Power and Oil & Gas Transmission industries were the prime movers in July with $3.6 billion and $2.1 billion in projects, respectively, beginning construction activities. The Industrial Manufacturing Industry also saw some significant project activity with $1.5 billion in projects starting construction, while the Oil & Gas Production Industry contributed $923 million, the Pharmaceuticals & Biotech Industry added $867 million, and the Metals and Minerals Industry added $885 million in construction starts.

The Southwest region of the country was again a hot spot for industrial construction, with close to 80 projects worth an estimated $3.1 billion beginning construction. Five other regions saw between $1.4 billion and $1.5 billion in total investment for the month: the Great Lakes, Midwest, and Rocky Mountains regions with $1.4 billion and the Southeast and West Coast regions.

As long as industrial spending remains relatively strong, the unemployment rate should not suffer a dramatic increase. However, the unemployment rate has remained at more than 8% in the U.S. for more than three years, which is the longest period of unemployment remaining this high since the Great Depression. Industry is doing what it can to create jobs each month, but the government is going to have to take more significant steps to promote job growth across the board if the unemployment rate is going to dip below the 8% mark. However, with 2012 being an election year, this is unlikely to happen as both parties are more focused on ripping each other apart than doing what is best for the country. So enjoy the ride, as the unemployment rate is not likely to show sizable improvement during this calendar year.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.