Private employers hired more workers than expected in August, lifting hopes for the weak U.S. economy, but the nation’s unemployment rate rose for the first time in four months, suggesting the economy will struggle to grow through the rest of the year.
Private employers added a total of 67,000 jobs last month, according to the Labor Department’s August jobs report released Friday. That number was below the amount of jobs needed to keep up with population growth, but was better than expected. Both July and June’s private-sector job figures were upwardly revised.
Overall, the economy lost 54,000 jobs in August, partly because 114,000 temporary census positions came to an end. State and local governments shed 10,000 positions.
The unemployment rate for August ticked up to 9.6 from 9.5 percent in July, rising for the first time in four months. More than a half-million Americans resumed their job searches in August, which drove up the jobless rate. When the unemployed stop looking for work, they are no longer counted in the jobless rate. It’s the first time the labor force has grown since April.
Despite a better-than-expected private employment number for August, the economy is not out of the woods yet and the jobs market is likely to struggle through the rest of the year, said Mark Zandi, chief economist at Moody’s Economy.com.
“The coast is not clear,” Zandi told CNBC Friday. “I think it’s very unlikely that we will not get to over 10 percent this year, and that means policymakers can’t stand still. The Federal Reserve has to do more, and so does the President.”
President Obama greeted the August jobs report as positive news for the economy. Speaking at a press conference the White House Friday morning, Obama pointed to eight consecutive months of private sector jobs growth, saying it reflects the steps taken by the administration to “break the back of the recession.”
But Obama also warned that there is “no quick fix for the worst recession since the Great Depression.”
“I want all Americans to remind themselves that there are better times ahead, even after this economic crisis,” he said. “We remain the global leader in innovation, discovery and entrepreneurship.”
Obama also said he would address the current employment situation with a package of new measures to boost U.S. growth and hiring.
He also once again prodded the Senate to pass a bill that calls for about $12 billion in tax breaks for small businesses, as well as the creation of a $30 billion fund to help unfreeze lending. Republicans have likened the bill to the unpopular bailout of the financial industry.
“I will be addressing a broader package of ideas next week,” he told reporters. “We are confident that we are moving in the right direction. But we want to keep this recovery moving stronger and accelerate the job growth that is needed so desperately all across the country.”
On Monday Obama pointed toward a number of possible options when he spoke about extending middle class tax cuts, investing in clean energy, spending more on infrastructure, and delivering more tax cuts to businesses to encourage hiring.
The unemployment rate cannot drop until employers significantly ramp up hiring. Employers are slow to add new workers because of uncertainty over potential costs tied to recently passed health care and financial regulation reform as well as looming tax hikes.
Friday’s jobs report offered some glimmers of hope for the economy.
Both June and July's hiring figures were revised to show the private sector created more jobs in both months. The July figures were revised upward to 107,000 from 71,000. June was revised upward to 61,000 from 31,000. The revisions reflected smaller losses in construction, temporary help services and non-census government jobs.
Still, hiring has now been weak for four straight months. That deprives consumers of cash and reduces their ability to spend. That is one of the main reasons economic growth is likely to be so weak for the rest of this year.
“Ultimately, businesses will hire if they feel confident there will be revenue growth in the future,” said Julie Coronado, an economist at BNP Paribas. “But we’re growing at a pretty slow pace.”
The economy lost nearly 8.4 million jobs in 2008 and 2009. This year, private employers have added back 763,000 jobs. But the unemployment rate has barely moved, ticking down from 9.7 percent in January to 9.6 percent last month.
Including those who have given up looking for work and those who are working part time but would prefer full-time work, the so-called “underemployment” rate rose to 16.7 percent from 16.5 percent.
A jobless rate nearing 10 percent will ratchet up pressure on the Obama administration, Congress and the Federal Reserve to do more to jump start the economy. Tax cuts enacted in 2001 and 2003 are set to expire by the end of this year and many rank-and-file Democrats in Congress are joining Republicans in calling for all the cuts to be extended. President Barack Obama wants to let some tax cuts on upper income earners end.
Fed Chairman Ben Bernanke, meanwhile, said last week the central bank will take more steps to stimulate the economy if necessary. But he also said the foundations have been laid for economic growth to accelerate next year.