U.S. businesses stepped up their hiring in July, offering a modest amount of optimism after the worst stock-market sell-off since the 2008 financial crisis.
The Labor Department’s latest jobs report shows U.S. economy generated 117,000 jobs last month — more than twice the revised rate from June.
“It’s just so nice not to be punched in the gut again with these numbers,” Diane Swonk, chief economist and senior managing director at Mesirow Financial, told CNBC Friday. “I can finally breathe.”
The unemployment rate ticked down to 9.1 percent in July from 9.2 percent in the previous month, the government said, partly because some unemployed workers stopped looking for work. That means they are no longer counted as unemployed.
As a result, the number of unemployed people fell to 13.9 million, down from 14.1 million — that's nearly double the total before the recession.
The bright spots in the monthly jobs report included the creation of 154,000 private-sector jobs in July, with employment growth in healthcare, retail and manufacturing, even as the government sector cut 37,000 jobs. Still, 23,000 of those losses were almost entirely because of the shutdown of Minnesota’s state government.
May and June’s payroll numbers were revised higher by 56,000. But over time a 117,000 monthly jobs gain isn’t enough to keep the unemployment rate from rising. Nor would it erase fears on Wall Street that the U.S. may be on the verge of another recession.
Economists at Bank of America Merrill Lynch estimate that there is a 35 percent chance of another recession within the next year.
At least 125,000 jobs a month are needed to keep up with population growth. Twice as many are generally associated with significant declines in the unemployment rate, which had risen for three straight months before July.
President Barack Obama welcomed the latest jobs report, calling it encouraging and promising “things will get better.” At the same time, Obama said the economy isn’t producing enough jobs — something he said must be corrected.
Obama made the observations while discussing a new initiative to provide tax credits for companies that hire out-of-work military veterans. He told Washington’s Navy Yard audience "we are going to get through this,” adding that more jobs must be created each month to make up for the over 8 million jobs lost in the recession.
July’s modest jobs gain comes amid turmoil on world financial markets, as investors worry about a weak U.S. recovery, limited job creation and Europe's inability to tame its spreading debt crisis.
U.S. stocks on Thursday suffered their worst sell-off in two years, while European stocks slumped to a level not seen since after the financial crisis in mid-2009. Earlier Friday, heightened concerns about Europe's debt crisis sent global stock markets plummeting again.
The deal reached this week in Washington to raise the nation's borrowing limit failed to stem the selling. Though investors no longer worried that the U.S. government would default on its debt, a fresh batch of data showed that the economy was in worse shape than many had thought.
The economy grew at a meager 0.8 percent annual rate in the first six months of this year, the slowest pace since the recession officially ended. Manufacturers are barely growing. Service companies are growing at the weakest pace in a year and a half. Consumers cut spending in June for the first time in 20 months, and they saved more.
"There is a reassessment of the economic backdrop taking place right before our eyes," said Tom Porcelli, chief U.S. economist at RBC Capital Markets. He said the figures were a shock to investors, who are realizing that the economy is in worse shape than they had assumed.