U.S. economy adds 163,000 jobs, rate rises to 8.3 percent

By Christopher S. Rugaber

Associated Press

Published: Friday, Aug. 3 2012 12:00 a.m. MDT

A construction worker on the job in Boston Monday, July 9, 2012. U.S. employers added 163,000 jobs in July, a hopeful sign after three months of sluggish hiring.

Elise Amendola, Associated Press

Enlarge photo»

WASHINGTON — Employers added 163,000 jobs in July after three months of sluggish hiring, a pleasant surprise that could signal the U.S. economy may be resilient enough to shake off a midyear slump.

The economy has added an average of 151,000 jobs a month this year, although that's not been enough to drive down the unemployment rate, which ticked up to 8.3 percent from 8.2 percent in June.

The Labor Department's July employment report did little to settle the political debate about the economy, with Obama administration officials and Gov. Mitt Romney seizing on the latest data to bolster their campaigns with less than four months to go until Election Day.

Before Friday's report, economists were increasingly worried that a slowdown in hiring and growth from April through June could get worse and develop into something more long-lasting. Now they are breathing a little easier.

"After a string of disappointing economic reports ... we'll certainly take it," said James Marple, senior economist at TD Economics.

Stocks rose sharply in midday trading. The Dow Jones industrial average added 247 points to 13,126, while the broader Standard & Poor's 500 index rose 28 points to 1,393.

The government uses two surveys to measure employment trends. Hiring is measured through a survey of businesses. The unemployment rate comes from a survey of households and is calculated by dividing the number of people who say they are unemployed by the size of the labor force. In July, more people said they were unemployed, while the size of the labor force shrank.

Economists say the business survey is more reliable.

A better outlook on hiring could make the Federal Reserve reluctant to take more action to spur growth. The Fed, which ended a two-day policy meeting Wednesday, signaled in a statement a growing inclination to take further steps if hiring doesn't pick up.

But some economists say the job gains need to be greater for the Fed to hold off.

Paul Ashworth, senior U.S. economist for Capital Economics, said July's job gains were a "vast improvement" over the past four months. Still, they were well below the average 252,000 jobs a month added from December through February.

"It also isn't strong enough to drive the unemployment rate lower, which is what the Fed really wants to see. So, on balance, we doubt this would be enough to persuade the Fed to hold fire in September," Ashworth said.

The monthly report on job creation and unemployment is the most closely watched indicator of the U.S. economy. There are three reports remaining before Election Day, including one on Friday, Nov. 2, four days before Americans vote.

Stronger job creation could help President Barack Obama's re-election hopes. Still, the unemployment rate has been above 8 percent since his first month in office — the longest stretch on records that date back to 1948. No president since World War II has faced re-election with unemployment over 8 percent.

In remarks at the White House, Obama said the private sector has now added 4.5 million jobs in the past 29 months. But he acknowledged there still are too many people out of work.

"We've got more work to do on their behalf," he said.

Romney, the presumptive GOP presidential nominee, focused on the increase in unemployment, as did other Republicans.

"We've now gone 42 consecutive months with the unemployment rate above 8 percent," Romney said in a statement. "Middle-class Americans deserve better, and I believe America can do better."

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