Joseph Oeler Jr.
Lynne Sladky  /  AP
Joseph Oeler Jr., 35, of Hollywood, Fla. waits in line at a job fair sponsored by National Career Fairs in Dania Beach, Fla. Employment fell for a second straight month in July as more temporary census jobs ended and private hiring rose less than expected, pointing to an anemic recovery.
msnbc.com news services
updated 8/6/2010 12:48:21 PM ET 2010-08-06T16:48:21

Companies showed a lack of confidence about hiring for a third straight month in July, making it likely the economy will grow more slowly the rest of the year.

Private employers added a net total of only 71,000 jobs last month, according to the Labor Department's July report Friday. That number was far below the roughly 200,000 needed each month to reduce the unemployment rate. The unemployment rate for July was unchanged at 9.5 percent.

The modest job gains were even weaker when considering a loss of government jobs at the local, state and federal levels in July that weren't temporary census positions. Factoring those in the net gain was only 12,000 jobs.

“The good news here is we are not falling off a cliff; we are getting job growth,” Mark Zandi, chief economist at Moody’s Economy.com, told CNBC Friday. “But obviously this is not enough. If we don’t see better job growth later this year and next the recovery is in jeopardy.”

Speaking on the July jobs report following a tour Friday of Gelberg Signs, a small business in Washington, D.C., President Barack Obama emphasized the significance of the private sector job growth last month. Jobs in the private sector have grown in each of the past seven months instead of declining as they did in the first seven months of 2009, he noted.

“That’s a good sign,” Obama said, adding that the U.S. economy is emerging from the most serious downturn since the Great Depression. “Climbing out of any recession takes some time,” he said. “The road of recovery is not a straight line.”

Still, progress “needs to come faster,” Obama said, and he called on Congress to take more steps to help businesses.

In its July jobs report the government sharply revised down its jobs figures for June, saying businesses hired fewer workers than previously estimated. June's private-sector job gains were lowered to 31,000 from 83,000. May's were raised slightly to show 51,000 net new jobs, from 33,000.

Overall, the economy lost a net total of 131,000 jobs last month, mostly because 143,000 temporary census jobs ended.

The slow pace of hiring will weigh on the recovery, he said, with economic growth in the current quarter likely to come in even lower than the April-to-June quarter's already weak 2.4 percent.

The "underemployment" rate was the same as in June, at 16.5 percent. That includes those working part time who would prefer full-time work and unemployed workers who've given up on their job hunts.

Major Market Indices

All told, there were 14.6 million people looking for work in July. That's roughly double the figure in December 2007, when the recession began.

Even if hiring picks up, it will take years to regain all the jobs lost during the recession. The economy lost 8.4 million jobs in 2008 and 2009. This year, private employers have added only 559,000 new hires.

Friday's report is being closely watched by the Federal Reserve as it considers ways to energize the recovery. The report could persuade the Fed to take new steps to boost the economy and keep interest rates at record lows when it meets next week.

Without more jobs, consumers won't see the gains in income needed to encourage them to spend more and support economic activity. Even those with jobs may not feel confident enough to ramp up their spending.

That's important because many of the trends driving economic growth earlier in the recovery are fading. Companies boosted production in the winter and spring to rebuild inventories that were depleted in the recession. But that boost won't last much longer. And the impact of the federal government's stimulus package is also declining.

The economy grew at 5 percent in the fourth quarter last year and 3.7 percent in the first three months of 2010. But that slowed to 2.4 percent in the April-June period. That's not fast enough to generate many jobs and reduce the unemployment rate.

Many companies appear to be getting more out of their current employees rather than adding new staff. The average work week increased by one-tenth of an hour to 34.2 hours, the department said. That's up from about 33 hours in the depths of the recession.

Average hourly pay also rose 4 cents to $22.59, up 1.8 percent from a year earlier. That, along with the increase in hours worked, could provide some boost to spending.

The number of temporary jobs fell by 5,600, the first drop after nine months of gains.

Employers usually hire temp workers if they need more output but don't want to hire permanent employees. But "firms aren't even adding temporary workers right now," Gault said.

Manufacturers added 36,000 jobs in July, slightly above its monthly average this year. Those gains were aided by General Motor's decision to keep its plants running last month. Usually it closes them and temporarily lays off employees to retool for the new model year.

Construction firms cut jobs for the third straight month, losing 11,000, while financial firms shed 17,000 workers.

But retailers added 6,700 jobs. And the leisure and hospitality industry hired 6,000 additional staffers.

Corporate net income rose sharply in the second quarter, but businesses aren't yet using the proceeds to ramp up hiring. Companies in the S&P 500 index reported a 46 percent increase in net income for the April-to-June period, compared to a year earlier.

But many employers are uncertain about the direction of the economy. Some are concerned sales will slow once government stimulus and other temporary factors fade. Others fear what will happen if federal income taxes are allowed to rise next year as tax cuts enacted by President George W. Bush expire.

"People have a long worry list they're looking at," said Ethan Harris, chief economist at Bank of America Merrill Lynch.

Some companies are adding permanent workers. The hospital chain HCA Inc. has 8,300 open positions, company spokesman Ed Fishbough said. That includes nurses, physicians and information technology professionals needed to build HCA's ability to handle electronic medical records. HCA employs about 190,000 people.

But layoffs are also continuing. FBR Capital Markets, an investment bank based in Arlington, Va., cut its work force by about 15 percent in early July to about 500 employees, saying it needed to reduce costs.

The Associated Press and Reuters contributed to this report.

Video: Jobs report contradicts Obama’s ‘recovery summer’

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