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By Jason Stipp and Robert Johnson, CFA | 08-02-2013 12:00 PM

Johnson: Short-Term Softness May Persist in the Job Market

Despite recent weaker data, employment growth has remained stable year over year, but softness may persist in the next few months as job gains realign with GDP growth, says Morningstar's Bob Johnson.

Jason Stipp: I'm Jason Stipp for Morningstar. We got the government employment report for July on Friday. It showed 162,000 jobs were added to the economy, and the unemployment rate ticked down to 7.4%.

This was a little bit lighter on the jobs-added side than most people expected. Here to offer his take on that report is Bob Johnson, our director of economic analysis.

Thanks for joining me, Bob.

Bob Johnson: Great to be here.

Stipp: You were about at consensus in the 170,000 range, but you did have a few reasons why you thought we might come in a little bit lighter from our job preview video. What did you make of that 162,000 that we added?

Johnson: It really was a very interesting number. My take has been we've always had a steadily moving economy, and the real rate is about the same. Again, the year-over-year average number shows about 2% private-sector payroll growth. So it's a number that shows employment's not booming or busting. It's a steady-state type of number. The employment number itself wasn't particularly scary number at 162,000, in my opinion. It really was just a little light, but there were some special industry [factors] that were going on this time around.

Stipp: I want to talk about industries in a moment, but it was interesting to me that we had downward revisions for the two prior months, 176,000 from 195,000 in May and 188,000 revised down from 195,000 in June. Now we have 162,000 [in July]. So it bounced around a little bit, but all those number are below the 189,000 average that we've had over the past 12 months. Are we in a little bit of a soft patch here?

Johnson: I think that employment has been maybe just a little bit soft the last period of time. We had a period of time where employment really kind of moved a little bit faster than GDP growth, and so I think this is a natural re-alignment. I think, unfortunately, we've got a little bit more of an alignment, because right now GDP and employment growth are tracking even with each other, and usually GDP grows a little bit faster because of productivity. So, we may have a little bit more of this little bit of softening on a month-to-month base, but I think year-over-year we'll probably stay right around that 2% private-sector growth.

Stipp: Let's talk about some of the underlying industry trends. Retail came out as a strong one, with the 47,000 jobs added, and a couple of interesting areas of strength within retail.

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