Private Sector Expands Slightly, but Governments Cut Jobs; Treasury Yields Dip
By SUDEEP REDDY
The government’s latest snapshot of the job market was bleak, a sign the economic recovery is running out of steam with 14.6 million Americans still searching for work.
Job growth proved anemic in July as governments cut jobs and private-sector employers barely expanded.
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The economy shed 131,000 jobs, as 143,000 temporary Census workers fell off federal payrolls. Private-sector employment grew by 71,000 in July after a downwardly revised 31,000 in June. Government employment, not counting Census workers, fell by 59,000.
The unemployment rate held steady at 9.5% largely because people gave up hope of finding work and left the labor force.
The latest figures confirm the labor market has lost much of its momentum in recent months. The private sector has added 90,000 jobs a month on average so far this year, well below the 125,000 needed monthly just to keep up with population growth, let alone recover the eight million jobs lost during the recession. Two-thirds of the private-sector job creation this year occurred in March and April, when the economy’s trajectory appeared stronger.
“It’s a double whammy because it causes people to take a psychological step back,” said Tig Gilliam, chief executive of Adecco Group North America, the staffing firm. “Now, it looks like not only has the economy slowed, but maybe it wasn’t as good when it was originally reported as we thought.”
The disappointing data initially sent the Dow Jones Industrial Average down 160 points, but it recovered to end the day off 21 points to 10,653.56. Surging demand for safe U.S. government debt pushed the 10-year Treasury yield down to 2.82 percent, its lowest level since April 2009. The two-year note fell to 0.514 percent after falling to an all-time low of 0.494 percent during the day.
The labor market report compounds pressure on Congress, the White House and the Federal Reserve to do something to reignite stronger growth in the labor market.
At their policy meeting Tuesday, Fed officials plan to discuss whether to take the small but symbolically important step of reinvesting proceeds from its portfolio of mortgage-backed securities to maintain support for the economy. The weak jobs numbers add to the case for taking action, though officials must assess whether taking even a tiny step could create expectations for larger actions in coming months.
Even in expanding sectors, many employers remain wary of adding jobs without strong evidence the economy won’t take another turn downward.
The jobs report showed private-sector employers working their employees longer rather than hiring new ones. Aggregate weekly hours worked rose 0.3% overall, and 0.5% in manufacturing.
At Vista Industrial Products Inc., a sheet-metal fabricator in Vista, Calif., orders are strong and the company is running two 10-hour shifts a day to keep up. “Everybody is on overtime for production,” says Joshua Borja, the firm’s business development manager.
The company added 15 jobs since the beginning of the year, expanding by about 10%, but remains below its prerecession head count, wary of adding workers too quickly amid uncertainty among its clients.
Write to Sudeep Reddy at email@example.com