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Economy adds 117K jobs, a welcomed sign for troubled markets; 9.1% unemployment
Question of the Day
Job gains unexpectedly accelerated last month to 117,000, and the unemployment rate declined to 9.1 percent — news that eased recession worries in troubled financial markets.
The unexpectedly upbeat job gains reported by the Labor Department Friday morning were far more than the 85,000 new jobs expected by Wall Street economists. Major stock indexes had lost more than 10 percent of their value in recent days on fears that the economy could be falling into a double-dip recession.
But there was no sign of recession in the jobs report. Not only did job growth pick up after months of lagging behind, but the department increased its estimate of job gains in May and June by 56,000.
"What a relief," said Mark Vitner, senior economist at Wells Fargo Securities. "The modest rise was better than expectations and allays some fears."
While there was no recession in sight, he said the report showed the economy losing some momentum largely because of cutbacks in government spending and jobs. He said the report was consistent with economic growth of about 2.5 percent in the summer quarter.
Wall Street markets surged on the jobs news in the first few minutes of trading. The Dow Jones Industrial Average jumped as much as 145 points after losing more than 1,300 since the end of last month.
Job growth in the private sector was robust. Employers added 154,000 news positions, but that advance was partially offset by 37,000 layoffs of government workers. The large number of job losses in government was mostly due to a government shutdown in Minnesota, the department said.
But more layoffs are expected in the months ahead as budget cutting intensifies in nearly every jurisdiction from the federal government on down to county seats and municipal boards.
The jobs gains were mostly in the nation's predominant services industries, including a resurgence of temporary help and health care jobs, which had uncharacteristically fallen in earlier months this spring.
But manufacturing jobs also jumped by 24,000 thanks to a revival of auto production as disruptions from the Japanese earthquake waned. And the beleaguered construction industry saw a rare 8,000 increase in employment.
"Some of the weight on the labor market created by the auto supply-chain disruptions is lifting as production returns to normal," said Sophia Koropeckyj, senior economist at Moody's Analytics.
Capping the surprisingly strong jobs report, employers gave their workers a healthy increase in average wages of 0.4 percent in July after months of anemic gains.
The decline in the jobless rate to 9.1 percent from 9.2 percent in June will be particularly welcome on Wall Street and Main Street, as economists feared that further increases from a low of 8.9 percent hit early this year would signal that the economy was falling into recession.
But the decline in joblessness likely was due more to people exiting the labor force than to an increase in people finding jobs, economists said.
"More workers are staying out of the labor force or dropping out in frustration," Ms. Koropeckyj said.
While the jobs news should "temper some of the panic that set in earlier this week" in financial markets, "the report suggests a rocky recovery is still occurring," she said. "We need several more months of 100,000 plus payroll numbers to be more convinced that the economy is really improving."
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