U.S. economy adds 163,000 jobs in July

A fairly upbeat U.S. employment report released Friday showed 163,000 new jobs added in July, despite the overall unemployment level ticking up to 8.3 percent.

One thing is certain: The latest report from the U.S. Department of Labor provided fresh fodder for the political debate about the economy. President Obama's administration and Republican challenger Mitt Romney had widely divergent reactions.

Mark Zandi, chief economist at Moody's Analytics

Although payrolls were up 163,000, the largest increase since February, the unemployment rate increased to 8.3 percent from 8.2 percent, the Labor Department said.

"I was relieved," said Mark Zandi, chief economist at Moody's Analytics. "After three months of very weak job growth, I was nervous that the economy had significantly downshifted. But Friday's numbers suggest that it hasn't.

"If you look through the ups and downs in the monthly data, we are creating about 150,000 jobs per month," Zandi said in an interview. "That's what we have been doing for nearly two years. That's OK, that's enough to keep the recovery moving forward, but not good enough to bring down unemployment in a meaningful way."

The markets reacted positively and stocks rallied on Wall Street. The Dow Jones industrial average shot up 217 points, or 1.69 percent, to 13,096 at the close, while the broader Standard & Poor's 500 index rose 25.99 points, or 1.9 percent, to 1,391.

The market reaction might also have included a bit of optimism generated by a better-than-forecast report on manufacturing Friday.

Joel Naroff, president and chief economist of Naroff Economic Advisors, called the latest jobs numbers "neither fish nor fowl."

"Firms are hiring more workers, but it's the unemployment rate that most people look at, and the increase cannot help confidence," Naroff said, noting that the jobs numbers would have been "even better" if cutbacks in education had not continued.

"Outside the public education sector, though, the job situation brightened quite a bit. Just about every sector posted increases," Naroff said.

Notable in the July report was an increase of 172,000 private-sector jobs, while government employment fell 9,000.

The Brookings Institution said the decline in government jobs has hit teachers, police officers, and other public-sector workers, including emergency responders, as state and local governments, in an effort to balance budgets and grapple with falling tax revenues, have been forced to lay off.

According to the median forecast of economists surveyed by Bloomberg News, private forecasters had expected the unemployment rate to hold steady at 8.2 percent and payrolls to increase by 100,000, after an 80,000 gain in June.

With the economy a key issue in the presidential race, the two campaigns had different takes on the latest jobs numbers.

"Today's increase in the unemployment rate is a hammer blow to struggling middle-class families," Romney said in a statement. "President Obama doesn't have a plan and believes that the private sector is 'doing fine.' Obviously, that is not the case."

Alan Krueger, chairman of the White House Council of Economic Advisers, said the unemployment report showed that the economy "is continuing to recover from the worst downturn since the Great Depression."

Krueger repeated the administration's appeal for Congress to extend tax cuts for middle-income Americans and to act on Obama's proposals for spending on infrastructure for ports, roads, and highways and aid to state and local governments to stimulate hiring.

"Finally, we have some good news on the employment front," said IHS Global Insight chief U.S. economist Nigel Gault, noting that the "big improvements" were in private education, leisure and hospitality, and manufacturing.

"Manufacturing was helped by fewer seasonal auto shutdowns than anticipated," he said.

"The report will alleviate fears that the U.S. might be tipping back into recession," Gault said.

But uncertainties over the global economy, Europe's financial crisis, and the November elections - as well as worry that the U.S. economy may fall off a "fiscal cliff" at the end of the year - are providing "plenty of reasons for caution," Gault said. He expects monthly job growth will be only 100,000 to 150,000 in the second half of this year.

The "fiscal cliff" refers to the end of the tax cuts enacted under former President George W. Bush and deep spending cuts in defense and domestic programs that will take effect in 2013 if Congress does not act.

"This report argues that the recovery is firmly intact and that the economy's growth is about what it's been, which isn't great, but it's solid," Zandi said. "We are still growing. The tick up in the unemployment rate highlights all the hard work we still have to do and why the economy is so fragile.

"But, for me, the more important statistic was the gain in employment."


Contact Linda Loyd at 215-854-4822 or lloyd@phillynews.com.