Hiring continues to weaken; outlook dims for economic recovery this year

WASHINGTON — The nation isn't creating nearly enough jobs to reduce persistently high unemployment.

Making matters worse: Many of the jobs being created don't pay well enough to significantly jump-start spending by shoppers and stimulate the broader economy.

For the third straight month, the private sector hired cautiously in July. And the meager gains in the job market were more than wiped out by tens of thousands of cuts at all levels of government.

Private employers reported a net gain of 71,000 jobs for July, the Labor Department reported Friday. But 202,000 jobs were lost in federal, state and local government, 143,000 of them temporary census jobs. So the economy suffered a net loss of 131,000 jobs.

The unemployment rate was stuck at 9.5 percent for the second straight month, the department reported.

Analysts said it would probably climb back into double digits because the private sector is not creating jobs fast enough.

The 71,000 private-sector jobs are far below the 200,000 it takes for the unemployment rate to hold steady and keep pace with the growing work force.

The Labor Department also greatly revised its numbers for June, widening the job-loss figure for that month to 221,000 jobs, from the previously reported 125,000. Private-sector hiring in June, originally reported at 83,000, was lowered to 31,000.

State and local governments wrestling with budget shortfalls have shed 169,000 jobs this year. More losses are on the way: 20,000 to 30,000 more job cuts a month are expected during the rest of the year, despite $26 billion in federal aid.

Hurting the recovery

The weak report could put pressure on the Federal Reserve to take new steps to boost the economy when it meets next week.

Economists are especially concerned that the recovery is losing momentum as it enters the second half of the year, when the benefits of most of the government's stimulus spending will start to wear off.

"If we don't see significant job growth by the end of the year, the economy could be in serious trouble," said Bill Cheney, chief economist at John Hancock.

President Obama noted the economy has added private-sector jobs for seven straight months but said the progress "needs to come faster."

Job seekers face tough competition. On average, there are 4.7 people vying for each opening. That's down from the peak of 6.3 last year, but more than double the 1.8 unemployed per opening when the recession began in December 2007. Those who do have jobs are working longer and getting only scant increases in pay.

"Employers do not want to take chances," said Sung Won Sohn, an economist at California State University, Channel Islands.

Few high-paying jobs

In particular, the economy has struggled to add high-paying jobs, which help power the economy by putting more spending money in people's pockets.

This year, the economy has added only 117,000 high-paying jobs in industries such as construction, manufacturing and mining. In the past 12 months, it has lost 352,000 of these jobs.

The number of higher-paying jobs in engineering and at law firms has fallen in the past 12 months, too. Electrical engineers make an average of $41 an hour, lawyers $62.

Meager job growth has mainly come from the lower-paying service sector, which has generated 513,000 jobs this year. Examples of those jobs are cashiers, who make an average of $9 an hour, and hairdressers, who make $13.

That helps explain why Americans overall have reined in their spending and will probably stay hesitant. In June, shoppers failed to boost their spending, and their incomes stagnated, the government said this week. They also saved more. The annualized savings rate reached 6.4 percent, the highest in nearly a year — and triple the rate in 2007, before the recession.

About a quarter of the job gains this year have been at temporary-help firms, according to Moody's Analytics. Those jobs generally offer no benefits and are often part time. And 70 percent of the employment gains this year have been among workers with a high-school degree or less.

More troubling numbers

All told, there were 14.6 million people unemployed in July, roughly double the number without jobs when the recession started in December 2007. Counting people working part time who would prefer full-time work, plus unemployed workers who have given up on their job hunts, 25.8 million people were "underemployed" in July. The "underemployment" rate was 16.5 percent, the same as in June.

Even if hiring picked up, it would take years to regain all the jobs lost during the recession. The economy lost 8.4 million jobs in 2008 and 2009. This year, private employers have added 559,000 jobs.

Associated Press reporters Christopher Leonard, Tom Krisher and Tali Arbel contributed to this report. Material from The New York Times is included in this report.