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US economy's job engine revved up in July

While the July jobs report shows improvement in jobs creation, the unemployment rate edged higher. NBC's Brian Mooar reports.

U.S. employers created 163,000 jobs in July -- the most in five months -- but the jobless rate edged higher, leaving the impression intact that the economy is just muddling along.

The number of jobs created, closely watched as one of the best signals of the economy's health, far exceeded the 100,000 jobs that economists had expected. But the economy still is far from creating enough jobs to do much for the 12.8 million Americans who are out of work. And the unemployment rate edged up to 8.3 percent from 8.2 percent in June, the Labor Department said.

"Even with the better-than-expected payroll number, it's not sufficiently big enough to change the big-picture view. The economy is growing, but not at a satisfactory rate to bring down unemployment," said Stephen Stanley, chief economist at Pierpont Securities.

Employment for May and June was revised to show 6,000 fewer jobs created than previously reported. The data is adjusted for seasonal factors, making it somewhat unpredictable in June and July, when teachers are off for summer break.  

The closely watched employment report comes two days after the Federal Reserve sent a stronger signal that a new round of major support could be on the way if the faltering recovery does not pick up. But economists said they didn't think July's data would be enough to induce the Fed to launch a third round of bond purchases, known as quantitative easing, until it sees more evidence the economy is deteriorating further.

"This report does not make a case for doing a third round of quantitative easing," said  Dan Heckman, senior fixed income strategist at U.S. Bank Wealth Management Group.

Related: Fed takes a watch and wait stance on slowing economy

That's despite the approach of the presidential and congressional elections in November, which could leave the central bank open to criticism from Republicans who have made the weak economy a centerpiece of their campaigning.

The Fed has held short-term interest rates close to zero for nearly four years and pumped about $2.3 trillion into the economy by purchasing securities.

The Fed took no action at its meeting of policymakers this week but could act at its next scheduled meeting in September, after central bankers will also have had a chance to see August's payrolls report.

The labor market slowed sharply after strong gains in the winter, spelling trouble for President Barack Obama.

"We've still got too many folks out there who are looking for work, we've got more work to do on their behalf," Obama told an event at the White House.

Earlier, Alan Krueger, chairman of the White House Council of Economic Advisers, said that while the increase in the jobless rate was unwelcome, to be precise the rate "rose from 8.217 percent in June to 8.254 in July."

Romney called the report a "hammer blow" to middle class families.

A recent Ipsos/Thomson Reuters poll showed 36 percent of registered voters believe Republican presidential candidate Mitt Romney has a better plan for the economy, compared with 31 percent who had faith in Obama's policies.

The unemployment rate has been stuck above 8 percent for more than three years, the longest run since the Great Depression.

Fears of deep government spending cuts and higher taxes that are due to begin in early 2013 and fears that Europe's debt crisis could get worse have dissuaded employers from hiring, economists say.

Economists say the biggest factor weighing on sentiment is fear that politicians in Washington will be unable to avoid the so-called fiscal cliff at the turn of the year.

"We are not seeing large-scale layoffs, so job destruction is pretty limited," said Scott Brown, chief economist at Raymond James & Associates in St. Petersburg, Fla.

"The problem all along has been a lack of hiring, and we expect that the uncertainty about the elections, the fiscal cliff and Europe may restrain the pace of hiring as well as capital spending," Brown said before the release of the report.

Data last week showed the economy grew at an annual pace of 1.5 percent in the second quarter, far short of the 2.5 percent rate needed to keep the unemployment rate stable.

The private sector again accounting for all the job gains, adding 172,000 new positions.

Government payrolls dropped by 9,000, as local governments laid off teachers.

Construction employment dipped 1,000, despite increases in home building. Manufacturing payrolls increased 25,000, largely because of fewer layoffs in the auto sector as manufacturers kept production lines running during the month.

Within the vast services sector, employment gains were widespread. Temporary help services increased 14,100. Businesses are hiring temporary workers due to the uncertain outlook.

Hiring in the utility sector was restrained by a strike at a power firm in New York last month.

Average hourly earnings increased 2 cents last month, suggesting consumer spending will struggle regain steam after it slowed sharply in the second quarter.

The average workweek was unchanged at 34.5 hours.

Reuters and The Associated Press contributed to this report.

 

 

The monthly jobs report for July shows US employers added 163,000 jobs, while the unemployment rate ticked up to 8.3% from 8.2% in June. A CNBC panel discusses the data.