Economy Creates 163,000 New Jobs, but Rate Rises to 8.3%
The U.S. economy followed up a weak second quarter by creating more jobs than expected with 163,000 new positions added in July, but the unemployment rate rose to 8.3 percent.
Markets reacted positively to the announcement, with the stock marketsurging at the open and safe-haven bond prices plunging. Economists had been expecting 100,000 new jobs.
As the country struggles to gain growth traction, the unemployment rateheld above 8 percent for the 41st consecutive month, according to the latest report from the Bureau of Labor Statistics.
"I'd call this a soft 163," said Steve Blitz, chief economist at investment research firm ITG in New York. "If you want to take from this the notion that the economy is not heading to a recession or something more ominous, that's fine. But if you want to take from this the idea that the economy is about to accelerate, I think that would be a big mistake."
Despite the seemingly good news, the report's household survey showed that the actual amount of Americans working dropped by 195,000, with the net job gain resulting primarily from seasonal adjustments in the establishment survey. The birth-death model, which approximates net job growth from newly added or closed businesses, added 52,000 to the total.
The household survey also showed 150,000 fewer Americans in the workforce.
In all, the government said private payrolls added 172,000 positions — about in line with Wednesday's report from ADP and Macroeconomic Advisors — while government subtracted 9,000.
"While the monthly gain is still relatively small by historical standards, it might help spark somewhat higher consumer optimism and spending," Kathy Bostjancic, director of macroeconomic analysis at The Conference Board, said in response to the report.
At this point, all economic reports and particularly the jobless number are viewed through the prism of how they might affect Federal Reserveaction.
The Fed this week offered little direction other than to affirm that it stood at the ready to provide more quantitative easing stimulus if needed. But Chairman Ben Bernanke may add more to the conversation during the annual summit in Jackson Hole, Wyo., later this month, and the central bank's policy committee meets again in September.
"If the Fed is sitting there wondering what to do, this doesn't tell them they don't have to do anything," Blitz said. "If anything, the numbers are going to get weaker than the 163 next month."
At least part of the positive market reaction, then, probably could be attributed to anticipation of more Fed intervention.
"The bottom line is that the employment report shows a strong headline reading but as we believe that most people, and importantly the (Fed), will resort to digging beneath the headlines to focus on the enormous uphill struggle facing the labor market," said Andrew Wilkinson, chief economic strategist at Miller Tabak in New York.
"The report should do little to change expectations for a further move in September from the Fed and so one can understand why equities are happy to advance," he added.
Professional and business services led the job gains with 49,000 new positions, while the hospitality industry added 29,000 and manufacturing grew by 25,000.
The average work week held steady at 34.5 hours while average hourly earnings rose 2 cents to $23.52.
June's anemic 80,000 gain was revised down to just 64,000.
The first quarter of the year saw an average of 225,000 new positions a month, a figure that dropped off considerably in the second quarter and helped fuel the political debate over which candidate — President Obama or Republican Mitt Romney — is better suited to bring the economy out of its malaise.
The Obama administration put the onus on Washington lawmakers, with whom the White House has been doing battle over the best prescription for job growth.
"We know that there is an availability for us to move ahead if we can get cooperation from the Congress," Labor Secretary Hilda Solis told CNBC's "Squawk on the Street."
Romney, though, focused on the unemployment level and noted that this is the longest period in American history that the jobless rate has held above 8 percent.
"That is an extraordinary record of failure," Romney said at a Las Vegas campaign stop.
While the figures themselves have been gloomy enough, there is considerable debate over whether the Labor Department's headline numbers present the true picture.
A measure that takes into account those who have stopped looking for jobs as well as those working part-time for economic reasons has hovered well above the headline rate that only counts the unemployed actively looking for jobs. The so-called "real" unemployment rate, or U-6 measure, is above 20 percent in Nevada and California.
On a national level, that more encompassing rate edged higher to 15.0 percent.
Unemployment for blacks fell from 14.4 percent to 14.1 percent, while the rate for Latinos slid from 11 percent to 10.3 percent. The unemployment rate for teenagers edged higher to 23.8 percent.