U.S. Adds 162,000 Jobs as Growth Remains Sluggish

U.S. Adds 162,000 Jobs as Growth Remains Sluggish

The painfully long and slow recovery of the American economy stumbled last month as employers added a disappointing 162,000 jobs, the government reported on Friday, leaving uncertainty about the timing of the Federal Reserve’s plans to begin tapering its extraordinary efforts to revive healthy growth after the financial crisis that hit the world five years ago.

The unemployment rate, which comes from a different survey, gave a more encouraging signal, edging down to 7.4 percent from 7.6 percent in June. But the improvement was only partly a result of more people getting jobs. More people also dropped out of the labor force. The unemployment rate refers only to people who are actively looking for work.

While the jobs report was lackluster, particularly compared to expectations that the economy might add closer to 200,000 jobs, many economists said the latest data was unlikely, on its own, to cause Federal Reserve officials to back away from plans to begin easing its stimulus policies. Ben S. Bernanke, chairman of the Fed, has said that the central bank would start reducing its monthly purchases of Treasuries and mortgage-backed securities “later this year.” Many Wall Street analysts have interpreted that comment as pointing to action as early as the Fed’s meeting in September.

“The payroll numbers were a little disappointing, but the Fed has said it’s more interested in the unemployment rate than the payroll numbers,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. He noted that the Fed’s own forecasts put the unemployment rate around 7.2 to 7.3 percent at the end of this year, not far below the July level. Referring to inflation, he said, “If anything, today’s numbers would harden my view if I were a hawk and persuade me to become more hawkish if I were wavering.”

Not everyone agreed with that view, with several analysts suggesting the Fed might wait until December to take its first step. The mixed signals from July’s jobs report will most likely focus even more attention on August’s jobs snapshot, the last before the Fed’s next meeting, scheduled for the middle of September.

“The committee needs to see more data on macroeconomic performance for the second half of 2013 before making a judgment on this matter,” James Bullard, president of the Federal Reserve Bank of St. Louis and one of the members of the Fed committee that sets interest rates who is more dovish on inflation, said in a speech on Friday.

Other indicators also painted a somewhat darker picture of the economy and the job market than was evident from reports earlier this year, with both average hourly wages and the length of the private sector workweek shrinking modestly in July. The job gains reported on Friday were concentrated in retail, food services, financial activities and wholesale trade, according to the Labor Department. Manufacturing gained 6,000 jobs, the first improvement since February, although economists caution that the timing of auto plant shutdowns in the summer can distort the numbers.

July represented the 34th consecutive month of job creation, but the latest pace of employment gains is still far below what would be needed to absorb the backlog of unemployed workers anytime soon. At the roughly 192,000-a-month average rate of job growth so far this year, it would take more than seven years to close the so-called jobs gap left by the recession, according to the Hamilton Project at the Brookings Institution. There are now 11.5 million Americans looking for work who cannot find it. That figure nearly doubles when two other groups of “underemployed” workers are taken into account: people who want to work but have stopped looking, and people who are working part time because they cannot secure full-time jobs. The number of Americans in so-called involuntary part-time employment has barely budged in recent years, and the total for July 2013 was exactly the same as a year earlier.

For these unemployed and underemployed workers, the social safety net that has been supporting them has frayed as a result of federal, state and local budget cuts.

“I honestly didn’t think it would be this hard,” said Keith Aiken, 38, who moved into a homeless shelter in Greensboro, N.C., about a month ago. His employer of more than a decade, a group home for people with disabilities, shut down last August, and he has been looking for work ever since.

After state officials ended North Carolina’s eligibility for federal unemployment benefits last month, Mr. Aiken’s benefits stopped and he was no longer able to pay his rent.

“Hopefully, something will come open pretty soon,” he said, noting that he was looking into contract labor in Iraq or Afghanistan. “I like to think I’m down but not quite out yet.”

The outlook for hiring is unclear, particularly since even the moderate rates of job growth in recent months do not seem justified by the weak gains in economic output. The nation’s gross domestic product grew at an annual rate of 1.7 percent in the second quarter and 1.1 percent in the first quarter, much slower than would be predicted from recent hiring trends.

Economic output and job growth seem unlikely to stay decoupled for too long, some economists say, in which case output growth should start to pick up, or job growth should start to slow, or both.

“I think with the economy showing 1 percent growth on average over the last three quarters, you’re locked into 150,000 jobs per month for the rest of this year,” said Steven Ricchiuto, chief United States economist at Mizuho Securities.

One other possible explanation for the seemingly incongruous trends in job and output growth is the mix of jobs being created.

“It’s a lot of temp services, retail, food services, health care,” said Joshua Shapiro, chief United States economist at MFR Inc.

“With low-end jobs contributing more than half the growth, the income generated would be not that great, and you wouldn’t be expecting it to drive strong consumer spending.”


Nelson D. Schwartz and Binyamin Appelbaum contributed reporting.