An economy that was already on shaky ground just lost another layer of support, with a key reading on the labor market showing no signs of life.
The Labor Department said Friday that nonfarm payrolls fell by a remarkable 131,000 last month, about double what economists were expecting. Private hiring was anemic; corporate America added 71,000 positions in July, about 20,000 fewer than anticipated and further evidence that, while profits are relatively robust, companies are reluctant to hire. That reluctance likely stems from the uncertain regulatory environment and concerns about higher taxes next year.
The government's payroll fell by 202,000 as temporary Census workers were let go.
What’s more, last month’s weak report now looks even worse, with the Labor Department revising that figure to a loss of 221,000 jobs from the originally reported 125,000.
The unemployment rate held steady at 9.5%. Ironically, while economists had anticipated that number would rise to 9.6%, it’s not necessarily good news that it didn’t. As more would-be workers become discouraged about their bleak prospects for employment, they simply drop out of the hunt, and fewer people classified as looking for work has the effect of keeping a lid on the overall unemployment rate.
The report also showed that 45% of those without a job, 6.6 million people, have been out of work for more than six months.
Dan Greenhaus, chief economic strategist at Miller Tabak, called the report "absolutely a mixed bag," noting the labor market recovery is better than it was in the 1991 and 2003 recoveries, but jobs growth remains very weak.
"On this front, the improvement we’ve seen of late in terms of recovering to pre-recession levels of employment has stalled out," he said. "As of July, we remain 5.59% below the peak level of employment while the labor force continues to shrink. Indeed, if we return the labor force to its May 2009 high, the unemployment rate would be over 10.3% rather than the 9.5% reported."
Today’s report comes at a critical juncture for the U.S. economy. Market observers - and many average Americans - are starting to believe the tepid recovery from the depths of the recession was already starting to show signs of fatigue.
The weak hiring market is not only discouraging to job hunters but also continues to rein in overall economic growth. Consumer spending is lethargic, and the real estate market, despite record-low rates on mortgages, is mired in an abysmal slump in many parts of the country.
On Thursday, the government said weekly claims for first-time unemployment benefits rose to their highest level since April which could portend more weakness in the August report.
One hint of good news came in the form of the average workweek, which inched up to 34.2 hours last month from 34.1 in June. People working more hours means they have more to spend.
Average hourly earnings improved to $22.59 in July, up 4 cents.