Courtesy of The New York Times
America added more jobs than expected last month, offering a pleasant surprise after many months of disappointing economic news. Even so, hiring was not strong enough to shrink the army of the unemployed in the slightest.
Employers added 163,000 jobs in July, the Labor Department reported on Friday. That was more than twice the job growth in the previous month, and substantially more than Wall Street analysts had forecast. The underlying details of the report, however, ranged from unimpressive to outright discouraging and provided plenty of fodder for Republican attacks on President Obama’s economic legacy.
The Obama administration, for its part, argued that Republican obstructionism to its economic policies was holding back the recovery.
July’s jobless rate ticked up slightly to 8.3 percent, about the same as it has been all year. A broader measure of unemployment — including part-time workers who want full-time jobs, and people who have given up looking for work — rose to 15 percent.
United States markets closed substantially higher on the news. But the mixed report gave investors, workers, presidential campaigns and Federal Reserve officials anything but a clear signal on the strength of the economy. Job growth seems to be heading sideways.
“It’s a lot better than we’d been seeing in the last few months, but it’s still short of the kind of job growth we were seeing at the beginning of this year,” said Paul Ashworth, chief North American economist at Capital Economics. As for the pace of hiring through the rest of the year, he said, “I think this is about as good as it’s going to get.”
Given the lackluster gains in Friday’s report, many economists remain convinced that the Federal Reserve will step in with additional monetary stimulus as soon as its next meeting in September.
In a statement this week, Fed officials acknowledged that the recovery was slowing and said they stood armed and ready on the sidelines. The most likely actions include making another round of asset purchases and extending its public predictions on interest rate policy.
“Today’s report doesn’t take the pressure off of them to do something to move the economy up from 2 percent growth,” said Steve Blitz, chief economist at ITG Investment Research. “By the same token, it also takes the gun away from their head that they have to do something very quickly.”
By their next meeting, Fed policy makers will have another month of job data, which could provide further guidance.
Even if the Fed does act, more monetary stimulus may not be all that effective, given that the central bank has pumped so much money into the economy already.
“There isn’t any fantastically strong monetary policy tool left out there,” Mr. Ashworth said. “They’ve already fired the heavy artillery.”
In their own ways, both the Obama administration and its Republican opposition claimed that the jobs report was evidence that fiscal policy needed to change, too.
“This is an extraordinary record of failure,” Mitt Romney, the presumptive Republican presidential nominee, said at a campaign appearance in North Las Vegas, Nev. “The president’s policies have not worked because he thinks government makes America work. He’s wrong.”
At an event in Washington, Mr. Obama said there was “more work to do” on behalf of the nation’s 12.7 million idle workers. His administration has argued, though, that the president has not actually had a chance to fully execute his economic policy agenda because of Congressional gridlock.
“If you look at today’s jobs report, where we saw declines were construction and government education jobs,” said Alan B. Krueger, the chairman of President Obama’s Council of Economic Advisers. “The main components of the Jobs Act would target exactly those two areas, by investing more in infrastructure and helping local governments keep teachers and first responders on the payrolls. I think it’s the kind of medicine that’s well targeted to the continuing areas of weakness in the job market.”
Congress is now in recess, and is not expected to undertake any significant actions before November’s election.
Economists do not expect job growth to pick up much any time soon. Concerned about the European debt crisis and the draconian American fiscal tightening scheduled for the end of the year, many companies have postponed hiring until they have more clarity about policy conditions and global financial markets.
“Truly, what I’m worried about is that corporate profits have not been as good in the last six months as they had been before,” said Neal Soss, chief economist at Credit Suisse. “Whatever cash on hand I have, I have because I’ve been scared, and I’m going to keep it until I’m not scared anymore.”
Government layoffs, which have occurred nearly every month for the last two years, have been partly offsetting job growth in the private sector. In July, total government employment — that is, at the federal, state and local levels — fell by 9,000 jobs.
Forecasts for gross domestic product growth in the third quarter of this year have fallen in recent days after other disappointing economic news from manufacturing and consumer spending. This bodes poorly for employment growth, which is already playing catch-up in what has been called a jobless recovery.
The economy now produces more goods and services than it did before the downturn officially began in December 2007. But it does so with almost five million fewer jobs.
“Nearly the entire reduction in unemployment since October 2009 has been accomplished through a significant drop in the percentage of adults participating in the labor force,” said Peter Morici, a professor in the business school at the University of Maryland.