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US hiring picked up in July; so did unemployment

By Paul Wiseman

Associated Press

Published: Friday, Aug. 3 2012 3:28 p.m. MDT

The other is the household survey. Government workers ask whether the adults in a household have a job and use the findings to produce the unemployment rate. Last month's uptick in joblessness was practically a rounding error: The unemployment rate blipped up from 8.22 percent in June to 8.25 in July.

Worries have intensified that the U.S. economy will fall off a "fiscal cliff" at the end of the year. That's when more than $600 billion in tax increases and spending cuts will kick in unless Congress reaches a budget deal.

The draconian dose of austerity is meant to force Republicans and Democrats to compromise. If they can't and taxes go up and spending gets slashed, the economy will plunge into recession, contracting at an annual rate of 1.3 percent the first six months of 2013, according to the Congressional Budget Office.

The rest of the world is slowing. Much of Europe is in recession as policymakers struggle to deal with high government debts, weak banks and the threat that countries will abandon the euro currency and wreck the region's financial system. Citing a "worsening crisis," European Central Bank President Mario Draghi said Thursday the bank is preparing to unleash its financial might and buy government bonds to help drive down borrowing costs in debt-ridden countries like Spain and Italy.

The high-powered economies of China, India and Brazil are slowing sharply, partly because Europe's troubles have hurt their exports.

In the United States, the Federal Reserve earlier this week passed up a chance to approve new measures to jolt economic growth but signaled it was ready to act if growth and hiring stayed week. That led many economists to predict the Fed would announce a third round of bond purchases designed to push long-term interest rates down and generate more borrowing and spending in the economy.

"If the previous three months of lackluster job creation were not enough to spur the (Fed) into acting more aggressively to stimulate the economy, these numbers must surely kill off the possibility of imminent action," said Chris Williamson, chief economist at Markit in London.

The job market still has a long way to go. The economy lost 8.8 million jobs from the time employment peaked in January 2008 until it hit bottom in February 2010. Since then, just 4 million, or 46 percent, have been recovered. Never since World War II has the economy been so slow to recover all the jobs lost in a downturn.

A broader measure of weakness in the job market deteriorated in July: The proportion of Americans who were either unemployed, working part time because they couldn't find full-time work or too discouraged to look for work rose to 15 percent from 14.9 percent in June.

Nearly 5.2 million Americans have been out of work for six months or more.

Eric Kosmack, 24, has applied for about 450 jobs since he graduated in January 2011 from Montclair State University in New Jersey. He is looking for a job in accounting to put his mathematics degree to work. He has had three temporary jobs since then, including one that ended Tuesday, but no luck in his search for a permanent one.

And many of the jobs he has seen described as "entry level" still ask for 1-3 years of experience, which he doesn't have. "I understand that they want to find the perfect candidate, but it seems like a long process," he said.

Those lucky enough to have jobs aren't seeing their spending power grow. Average hourly wages increased by 2 cents to $23.52 an hour in July. Over the past year wages have increased 1.7 percent — just matching the rate of inflation.

"The glass half full is that this report should ease fears that we're slipping into recession," said Michael Feroli, an economist JPMorgan Chase Bank. "The glass half empty is that the labor market generally still stinks when thinking about things that matter for people's well-being, like wage growth."

Government cutbacks continued to weigh heavily on the job market. The economy lost 9,000 government jobs last month and 660,000 over the past two years.