Something to cheer about, inasmuch as the slide had been arrested and further fall in the unemployment rate would have made the alarm bells ring even louder.
The Labor Department said that these were the best hiring figures since February. Even though the last few months had not reflected happy figures, they were sufficient to keep the overall average at 151,000 jobs per month, which was just about enough to keep up with the population growth, but not sufficiently large to impact the unemployment rate substantially.
The principal details of the report hovered between unimposing to complete disaster and providing plenty of ammunition to the Republican to renew their attacks on President Obama’s economic policies.
“This is an extraordinary record of failure,” Mitt Romney, the presumptive Republican presidential nominee, said at a campaign appearance in North Las Vegas, Nev. “The president’s policies have not worked because he thinks government makes America work. He’s wrong.”
The Obama administration, however, challenged the attacks and said that the continued Republican obstructionism to its economic policies was the reason why the economy was not able to grow.
US President Barack Obama responded gravely to the report saying that, this was the deepest crisis that the country had experienced since the 1930’s.
"We have still got too many folks out there who are looking for work; we have got more work to do on their behalf. We knew when I started in this job that this was going to take some time. We haven't had to come back from an economic crisis this deep or this painful since the 1930s," the president said in the White House complex. "But we also knew, if we were persistent, if we kept at it, kept working, that we would gradually get to where we need to be," he concluded on a hopeful note.
The Labor Department said on Friday that the unemployment rate rose marginally to 8.3 percent from 8.2 percent in June. Even though it was nothing to crow about, James Marple, senior economist at TD Economics said that it was a harbinger of better times, "After a string of disappointing economic reports ... we'll certainly take it," he said.
To explain in simple arithmetic, away from the technical jargon, for the unemployment rate to fall to 6 percent, we must continue to provide 163,000 jobs every month for the next 52 months and if we want to reach the 6 percent target within a year and a half, the economy would have to generate an average of 279,000 jobs over the next 18 months.
The US markets buoyed by the report closed considerably higher, but investors and workers and Federal Reserve officials are unable to really give it a rank – they just don’t have enough statistics to decide whether the economy stands weakened or strengthened. Instead of growing up or down, the job growth seems to heading sideways.
Paul Ashworth, chief North American economist at Capital Economics opined that given the current economic scenario, it was hard to expect anything better than this. He said that even though it falls short of the type of growth we saw at the beginning of the year it was a lot better than what growth there was the last few months. “I think this is about as good as it’s going to get.”
The report will again undoubtedly reignite the debate whether the Federal Reserve should step in with additional monetary stimulus and economists believe that with the lackluster gains, the choice and options will no longer be there and their hands will be forced.
Fed officials are acknowledging that the situation is dire and that the recovery was slowing but they were still hopeful that the economy would stand on its own legs. However, they said that if the economy continued to stutter, they were armed and ready and prepared to do the needful. Economists believe that the most likely options were another round of asset purchases and extending its public predictions on interest rate policy.
However, today’s report has given the Federal Reserve some breathing space, for the neither here nor there nature of the report allows them space to say, they’ll wait just a little bit more longer.
“Today’s report doesn’t take the pressure off of them to do something to move the economy up from 2 percent growth,” said Steve Blitz, chief economist at ITG Investment Research. “By the same token, it also takes the gun away from their head that they have to do something very quickly.”
By the time they meet next to decide, they will have also the August report in their hands to help them decide their next move.
Ashworth said, "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 more jobs are created the better the chances of President Barack Obama getting reelected. The unemployment rate has not fallen below 8 percent even once since he took over – that is the longest it has remained above 8. What he is up against can be gauged from the data that no US President, since World War II has faced re-election with unemployment over 8 percent.
The job gains were not limited to any particular sector but were spread out, with Education and Health Services at 38,000 adding the most, the much touted Manufacturing added 25,000 jobs, in fact the foodies, Restaurants and bars added more and contributed 29,000 jobs to the pile. Retailed employed 7,000 more workers. Meanwhile the government cut 9,000 positions.
The report showed that hourly wages had increased just about sufficiently, by 2 cents, to keep the average increase at 1.7 percent per month, to remain on par with the rate of inflation.
Rising unemployment has seen Americans inclined to start saving and cut down on their expenses. One of the prime reasons why growth declined in Q2 was that consumer spending, which accounts for roughly 70 percent of economic activity, slowed to an annual growth rate of 1.5 percent. In the first quarter it was 2.4 percent.
Even though economists had declared three years ago in June 2009, that the recession has official ended, the economy continues to be in the doldrums. Growth has slowed to an annual rate of 1.5 percent in the second quarter, manufacturing has shrunk for the second straight month and consumer confidence remains weak.
The people are becoming increasing worried about the future and are not very optimistic about it. This pessimism is taking on businesses and consumers. Moreover, Europe’s ever deepening financial crisis is severely curtailing US exports.
Economists have forewarned that unless Congress reaches a budget deal, the tax increases and the deep spending cuts will take effect and the US economy will fall of a “fiscal cliff,” at the end of the year. “A recession could follow, Fed Chairman Ben Bernanke has warned.”
