President Barack Obama is welcoming an improved national employment report, saying his administration has “rescued our economy from catastrophe.” In an appearance on the White House Rose Garden, Obama applauded a Labor Department report earlier Friday saying that the jobless rate declined to 9.4 percent from 9.5 percent a month earlier. But he said much more still needs to be done and that he won’t rest until “every American that is looking for a job can find one.”
Obama said, “We have a steep mountain to climb and we started in a very deep valley.”
Employers cut back sharply on layoffs in July, and the unemployment rate dipped for the first time in 15 months, sending a strong indication that the worst recession since World War II is finally ending.
A net total of 247,000 jobs were lost last month, the fewest in a year. That compares with 443,000 jobs that disappeared in June. And the unemployment rate for July declined to 9.4 percent from 9.5 percent in June.
The snapshot the Labor Department released Friday offered other encouraging news, too: Workers’ hours nudged up after sinking to a record low in June, and paychecks grew after having stagnated or fallen.
“There’s clearly been a turn for the better,” said economist Ken Mayland, president of ClearView Economics. “The worst is behind us in terms of layoffs.”
Still, the labor market remains on shaky ground. The 247,000 jobs lost in July represent a vast improvement on much higher job losses earlier in the year. But they’re a far cry from the positive job growth needed to sustain an economic recovery.
When the economy is healthy, employers need to add a net total of around 125,000 jobs a month just to keep the unemployment rate stable. And to push the jobless rate down to a more normal 5 percent range, it would take stronger job growth – of at least 200,000 jobs a month. Economists say it might take until 2013 to drive down the unemployment rate to 5 percent.
Yet the new figures were better than many analysts were expecting, and they signaled improvements to an economy that has been clobbered by the recession. Analysts had been forecasting that job losses would amount to around 320,000 and that the unemployment rate would tick up to 9.6 percent.
Stocks surged after the report was released. In early-afternoon trading, the Dow Jones industrial average jumped 175 points, or 1.9 percent, and other stock averages also gained sharply.
President Obama welcomed the news, saying the numbers indicate “the worst may be behind us” in a recession well into its second year.
“Today, we’re pointed in the right direction,” he said in remarks in the White House Rose Garden. Even so, Obama added: “We have a lot further to go. As far as I’m concerned, we will not have a true recovery until we stop losing jobs.
The dip in the unemployment rate was the first since April 2008. One of the reasons the rate declined, though, was that hundreds of thousands of people left the labor force. The labor force includes only those who are either employed or are looking for work.
If laid-off workers who have given up looking for new jobs or have settled for part-time work are included the unemployment rate would have been 16.3 percent in July. That’s down from 16.5 percent in June, which was the highest on records dating to 1994. All told, 14.5 million were out of work in July.
After fresh revisions, job losses in May and June turned out to be less than previously reported. Employers cut 303,000 positions in May, compared with 322,000 previously logged. And they trimmed 443,000 in June, compared with an earlier estimate of 467,000.
The job cuts made in July were the fewest since August 2008.
The slowdown in layoffs in part reflected fewer jobs cuts in manufacturing, construction, professional and business services and financial activities – areas that have been hard hit by the collapse of the housing market and the financial crisis. There also were fewer layoffs in the temporary-help industry, which analysts watch for clues about future hiring. Retailers, though, cut more jobs in July.
Those losses were blunted by job gains in government, education and health services, and in leisure and hospitality.
The deepest job cuts of the recession came in January, when 741,000 job disappeared, the most in any month since 1949. Since the recession began in December 2007, the economy has lost a net total of 6.7 million jobs.
Slower job losses are occurring because companies aren’t cutting investment and spending as drastically as they had been during the depths of the recession, which came in the final quarter of last year and carried over into the first quarter of this year.
With companies feeling a bit better about the economy’s prospects and their own, they boosted workers’ hours in July. The average work week rose to 33.1 hours, after having fallen to 33 hours in June, the lowest on records dating to 1964.
And employers bumped up wages. Average hourly earnings rose to $18.56 in July, up from $18.53 in June. Hourly earnings were stagnant in June. Average weekly earnings, which fell in June, rose to $614.34. Those gains raised hopes that consumers – whose spending accounts for the single-largest slice of economic activity – will feel more confident and more inclined to spend in the months ahead, thus helping the recovery.
Other recent barometers have shown some improvements in manufacturing, housing and construction activity.
The government reported last week that the economy shrank at a pace of just 1 percent from April-to-June, another sign the recession is winding down. Many analysts predict the economy could start growing again in the current July-to-September quarter.
And the Fed recently observed that the economy is finally showing signs of stabilizing in some regions of the country – especially in parts of the Northeast and Midwest – bolstering hopes of a broader-based recovery this year.
Even with the improvements, it will take time for the jobs market to fully heal. The Federal Reserve has said the jobless rate is likely to top 10 percent in 2009.
Some Fed officials think the rate could rise as high as 10.6 percent in 2010. The post-World War II high was 10.8 percent at the end of 1982, when the country suffered through a severe recession.
An elevated unemployment rate could become a political liability for Obama when congressional elections are held next year. The last time the unemployment rate topped 10 percent, the party of the president – then Ronald Reagan’s GOP – lost 26 House seats in the midterm elections in 1982.
Obama has urged Americans to be patient and give time for his $787 billion stimulus package of tax cuts and increased government spending to take hold. Most of the money will flow in 2010.