Jobs data ease recession fears

Companies in the U.S. added more jobs than forecast last month, easing concern the world's largest economy is sliding back into a recession.

Private payrolls climbed 67,000 after a revised 107,000 increase in July that was more than initially estimated, Labor Department figures showed Friday. The unemployment rate rose to 9.6 percent as more people looked for work.

"The worst fears were not realized, but it's still not good enough," said Stephen Stanley, chief economist at Pierpont Securities, whose forecast for a 60,000 increase in private payrolls was among the most accurate in a Bloomberg News survey of economists. The median forecast called for an increase of 40,000.

Stocks climbed around the world and U.S. Treasurys slumped as the employment report bolstered Federal Reserve Chairman Ben Bernanke's view the conditions are in place for a pickup in growth in 2011.

While companies such as Caterpillar are boosting staff as the global economy recovers, payrolls are expanding too slowly to bring down an unemployment rate hovering near a 26-year high.

"The double-dip talk was probably misplaced," said Maury Harris, chief economist at UBS Securities. "From a historical perspective, things are still soft. The economy ought to be doing better."

Friday's data, together with another report this week showing manufacturing expanded faster than forecast in August, reduce the odds the Federal Open Market Committee will ease policy at its next meeting on Sept. 21, economists said.

"There is less reason to be concerned about the trajectory of the economy in the very near term, but labor-market trends remain weaker than the Fed is willing to tolerate in the long run," said Louis Crandall, chief economist at Wrightson ICAP. "Continued stagnation will exhaust the Fed's patience at some point."

President Obama said there is "no quick fix" for the economy, and he promised to lay out new ideas next week to boost growth and hiring. The president, speaking at the White House, urged Congress to pass a package of measures to help small businesses, including tax breaks and aid to ease credit.

The White House is considering payroll-tax relief to encourage new hiring and other business tax breaks as well as more infrastructure spending, according to people familiar with the discussions.

Public-opinion polls show jobs and the economy are top concerns among voters two months before November congressional elections in which the Democrats are at risk of losing their majorities in the House of Representatives and the Senate.

Projections of 55 economists for private payrolls ranged from a drop of 12,000 to a 120,000 increase. The government revised the July head count from a previous estimate of a 71,000 gain. Economists surveyed projected the jobless rate would rise to 9.6 percent from 9.5 percent in July.

Overall employment, including government agencies, fell 54,000 for a second month, compared with a median forecast for a decline of 105,000 in the Bloomberg survey. The decrease reflected a 114,000 drop in temporary workers hired by the government to conduct the 2010 census.

Manufacturing payrolls decreased by 27,000 after gaining 34,000 the previous month. The median forecast called for a 10,000 increase.

"We're always cautious about hiring because we want to be absolutely certain that this isn't some temporary growth that we see," said George Buckley, chief executive officer at 3M, which makes 55,000 products from dental implants to Post-it Notes.

Caterpillar, the world's largest construction-equipment maker, said last month it may add as many as 9,000 workers worldwide this year as sales climb in developing markets.

Employment at service-providers decreased 54,000 last month. Construction companies added 19,000 workers, the first gain in four months, and retailers cut 4,900 workers.

The 723,000 increase in payrolls in the eight months through August shows it'll take years to recoup the 8.4 million jobs lost during the recession that began in December 2007, the biggest employment slump in the post-World War II era.

Unemployment, which reached a 26-year high of 10.1 percent in October, will average more than 9 percent through 2011, according to a Bloomberg survey.