U.S. jobless rate slows

The most heartening U.S. employment report since last summer suggested on Friday a recovery was under way — and perhaps gathering steam — despite the reluctance of the nation's businesses to resume hiring or even stop shedding jobs.

Employers eliminated 247,000 jobs in July, a huge number by the standards of an ordinary recession, but the smallest monthly loss since last August, the Bureau of Labor Statistics reported.

And the unemployment rate, rising for months, ticked down to 9.4 percent from 9.5 percent in June, mainly because so many dropped out of the hunt for work, ceasing to list themselves as unemployed.

"Employers are no longer in a panic," said Ian Shepherdson, chief domestic economist for High Frequency Economics. "The pressure they felt to get rid of workers in a hurry is diminishing. What we don't see yet is enough momentum in the economy to convince companies to hire again."

Responding to a report that was better than expected, stock investors drove up the Dow Jones industrial average by 114 points, or 1.2 percent.

A week earlier, the government announced another significant improvement — the economy contracted at an annual rate of only 1 percent in the spring quarter, vastly better than the fall and winter months.

The two reports have convinced many forecasters that when the history of the Great Recession is written, these summer months will be the big turning point, when the economy started to grow again.

"The labor market, like the overall economy, is beginning to stabilize, with the expectation that job losses will approach zero by the end of the year," said Chris Varvares, president of Macroeconomic Advisers, who expects the unemployment rate to peak at less than 10 percent.

The employment report released Friday included some unsettling information. True, the job loss in July was roughly half the 467,000 jobs lost in June. And the number of hours worked in a week rose by one-tenth to 33.1 hours, halting a lengthy decline.

But never in the 61 years of record-keeping has one-third of the unemployed, now 14.5 million people, been out of work for 27 weeks or more.

And for the first time since the Great Depression, the U.S. economy has added virtually no jobs in the private sector over a 10-year period. The total number of jobs has grown a bit, but only because of government hiring.

For the decade, there was a net gain of 121,000 private-sector jobs, according to the survey of employers conducted each month by the Bureau of Labor Statistics. In an economy with 109 million such jobs, that indicated an annual growth rate for the 10 years of 0.01 percent.

And in this climate, more than 400,000 who had been looking for work dropped out of the labor force in July, not even bothering to tell government pollsters that they would accept a job, part time or full time, if one came their way. "If there had been no drop in this labor-force participation, if all those people had continued to look for work, then the unemployment rate last month would have ticked up, to 9.7 percent," said Nigel Gault, chief domestic economist at IHS Global Insight.

Gault, sharing a view held by most economists, says the unemployment rate won't really begin to fall until employers are adding workers, at least 100,000 a month to keep pace with population growth.

A broader measure of the nation's unemployment, which included people too discouraged to look for work and those forced to work only part time, slipped to 16.3 percent from 16.5 percent in June.

Through July, 6.7 million jobs have disappeared since the recession began in December 2007, with manufacturers accounting for nearly one-third of the loss.

Although the number of lost jobs has dwindled nearly every month this year, nearly every business sector continues to suffer. Manufacturing and construction have been the hardest hit.

The health-services sector continues to add workers, about the only sector to have done so through the recession.

Local governments, along with the federal government, added 7,000 workers, with the help of stimulus money.

The stimulus is crucial, Shepherdson, the economist, said. "If it were to stop, the economy would grind to a halt. There is no momentum from consumer spending or business investment."

Material from New York Times columnist Floyd Norris is included in this report.