US economy sheds over 130,000 jobs in July
Some 131,000 jobs were lost and the unemployment rate remained stuck at 9.5 percent last month, officials said, as federal and local governments slashed jobs.
The private sector was unable to offset a massive government layoff of 143,000 census-takers, with firms creating only a modest 71,000 jobs.
The figures were seen as yet another sign that the US economic recovery is stagnating, and that the jobs market may take years to get back on its feet.
“The current pace of employment is too slow to replace the more than eight million jobs lost in the recession — not in the next year or two, perhaps even not in the next five years,” said Bart van Ark, chief economist of The Conference Board, a business research firm.
“It’s unlikely that industries such as construction and manufacturing will ever return to pre-recession employment levels.”
Analysts had predicted the ranks of working Americans would shrink by 87,000 in July, pushing the unemployment rate up to 9.6 percent.
Revisions to June figures also compounded the angst. The Labor Department said 221,000 jobs had been lost versus the 125,000 earlier reported.
That piled pressure on President Barack Obama to prove his economic policies are working ahead of November midterm elections.
Speaking at a Washington sign-makers plant, Obama pointed to the distance the private sector has traveled since the depths of the recession.
“The fact is we’ve added private sector jobs every month this year, instead of losing them, as we did for the first seven months of last year. That’s a good sign.”
But “the road to recovery doesn’t follow a straight line,” he admitted. “Some sectors bounce back faster than others.”
Obama’s opponents leaped on the data as evidence that massive economic stimulus spending had not worked.
“President Obama’s economic policies have failed to create sustainable job growth,” said Republican National Committee chairman Michael Steele.
On Wall Street, markets reacted gloomily, with major stock indices trading down heavily.
The Dow Jones Industrial Average fell 160 points after the announcement but later pared loses to finish the day down 21 points.
For months investors have anxiously awaited any clue of where the economy is headed, with data frequently providing a confused snap shot.
That trend appears to have continued, leaving Obama and policy makers facing tough choices about whether new crisis measures are needed.
The Federal Reserve’s rate-setting panel meets on Tuesday, when it is expected to ponder restarting stimulus policies.
But most analysts agree the central bank will shy away from any new measures unless absolutely necessary, to avoid using one of their few remaining policy levers.
“The central bank’s problem now is that any additional monetary stimulus will require unconventional methods,” said Ryan Sweet of Moody’s Economy.com. “The cost and benefit trade-off of these are unclear.”
But Friday’s report prompted calls for the Fed to keep record low interest rates.
“The Fed should remain dovish,” said analysts at Societe Generale.