Report on jobs blunts bad news
Unemployment rate ticks down, but fears of recession mount
WASHINGTON – The nation added 117,000 new jobs last month and the official unemployment rate dipped fractionally, but the underlying data of the latest government report provided more evidence of the economy’s continuing weakness and stoked fears that it could slip back into recession.
The new jobs figure – stronger than many analysts had predicted – was the highest tally since April and helped pull the July unemployment rate down to 9.1 percent from 9.2 percent in June, reversing three straight months of increases.
But welcome as the gains were, they still left the average job growth over the last three months at just 72,000 – only about half of what’s needed each month to keep pace with the growing population of workers.
More troubles for the economy came Friday when the Standard & Poor’s rating agency downgraded U.S. credit rating for the first time in modern history to AA-plus from the company’s top AAA level.
The drop in the jobless rate masked further long-term deterioration in the nation’s labor market: The decline was primarily because hundreds of thousands of workers dropped out of the job market, apparently too discouraged or seeing few opportunities worth chasing. Under the government’s statistical rules, these dropouts are not counted among the 14 million officially listed as unemployed.
The labor participation rate – the share of the U.S. working-age population who have jobs or are actively looking for work – fell to a new three-decade low of 63.9 percent. Friday’s report showed the population of people 16 and over rose by 1.8 million from July 2010 to July 2011. But during that same period, those in the labor market actually dropped by 400,000.
In addition, an estimated 8.4 million workers wanted full-time jobs but worked part time.
“It’s unprecedented. There are a lot of people who could be working who are not,” said Sophia Koropeckyj, a labor economist at Moody’s Analytics. “Clearly, the 9.1 percent does not at all reflect what is going on.
“We’re barely holding on to the recovery,” she said. “It wouldn’t take much for us to drop into recession.”
Wall Street reaction
Many analysts and investors were bracing for the worst on jobs after Thursday’s huge Wall Street selloff, which came in the wake of a series of grim economic indicators in the U.S. and deepening debt troubles in Europe that sharply raised fears of a double-dip recession.
The numbers in Friday’s jobs report were not disastrous and in that sense almost brought a sigh of relief. Stocks swung wildly through the day, eventually closing with little change. But few seemed any more reassured about the overall state of the economy or the way forward.
“The current situation looks extremely bad,” said Roger Farmer, head of the economics department at the University of California, Los Angeles. The Dow is down about 11 percent from its spring high, and unless there’s a sharp upturn in confidence, he said, the waning sentiment among investors is certain to produce a negative “wealth effect,” dragging down already weak consumer spending and the broader economy – and with it, employment.
Farmer sees a 50 percent chance of the U.S. falling into recession in the next six months.
Seeking to strike an upbeat note, President Barack Obama said, “Things will get better. And we’re going to get there together.” Obama said he hoped that after the August recess Congress would work in a more constructive way than it did on the debt ceiling.
“I want to move quickly on things that will help the economy create jobs right now,” he said. “The more we grow, the easier it will be to reduce our deficits.”
There were a handful of encouraging signs in Friday’s report. Factories accelerated their hiring last month, to 24,000 from June, with payrolls in the important auto and car-parts manufacturing sector up 12,000. Health care businesses kept expanding in July, adding 31,300 to their payrolls – with employment at hospitals rebounding with 14,000 new jobs.
Retailers added nearly 26,000 jobs over the month; car dealers and health and personal care stores bulked up. Professional and business services grew by 34,000 jobs, although hiring by the harbinger temp-help industry was flat.
The previously estimated 18,000 new jobs in June was revised to 46,000, and May’s payrolls were also about doubled to 53,000 in the new calculations.
State and local government payrolls continued to shrink in July, shedding a total of 39,000 jobs, including another 12,000 teaching and other positions at local schools.