9th Aug 2004 -The US job machine, which was supposed to shift into a higher gear in July continued to splutter instead. The employment report for the month of July showed that only 32,000 new jobs were added - far below the economists' forecast of adding 225,000 jobs.

The only good news is that the unemployment rate which was 5.6% in June has come down to 5.5% in July. But the payroll survey and the unemployment rate show opposing trends occasionally because they are based on different surveys. Economists considered the payroll survey to be a more reliable indicator of the overall health of the job market.

Though the Labor Department didn't break down the new job creation by large businesses in the report, a number of studies have shown that small and growing businesses mainly created the maximum jobs in the labor market. Manufacturing and construction added lesser jobs than the previous months of the year while the retail trade, information and financial sectors have come up with new jobs. Government jobs were flat.

But one of the reasons of less hiring can be the increasing price of energy - this week the crude oil prices topped $44 a barrel first time ever.

This dissapointing job market report can be a major issue in the coming presidential election debate. The US economy has lost a net 1.1 million jobs since President Bush entered office. The market couldn't do well despite a stimulating economic package with a number of tax cuts.

Federal Reserve Chairman, Alan Greenspan said in his July statement that the swift employment rate in June was also expected in July, but things didn't work properly and the lesser number of jobs has shattered those expectations.

The Federal Reserve Policy makers are going to meet shortly to set the new short-term interest rates. Though economists anticipate that they will increase rates by a quarter point, it may need to re-evaluate how many increases they will make during the rest of the year if the labor markets don't bounce back.