March 2, 2021

U.S. Posts Stronger Job Gains Amid Fear

Though the government’s monthly snapshot of the labor market brought a sigh of relief to traders on Friday, the number of jobs created was not enough to provide much comfort to those who have been waiting for the recovery to kick into high gear. The unemployment rate slipped a notch to 9.1 percent, but that was mainly because some people had simply given up looking for work.

The net new jobs created in July exceeded the dismal number reported in June, but the total was barely sufficient to accommodate normal population growth, exceeded the 18,000 net new jobs originally reported in June. The Labor Department also revised its estimate of American job growth in June to 46,000.

Stock markets, pummeled on Thursday on increasing pessimism over the American economy, drew about even in early trading, retreating from a 1 percent bounce higher at the opening.

The latest jobs numbers came in a week when Congress finally agreed to a deal to raise the country’s debt ceiling and cut government spending. Deep divisions remain between the two political parties on how to cut spending further at a time when many economists worry that the economy can ill afford it.

“It gives us some temporary relief,” said Nigel Gault, chief United States economist at IHS Global Insight. “But all we can say is it’s a bit better than the two previous months. I suspect, though, that relief will probably not last too long as people refocus on what they think will happen in the future.”

Indeed, other signs that the recovery has slowed to a crawl are mounting. The Commerce Department reported earlier this week that consumer spending, which accounts for up to 70 percent of economic activity, actually declined in June for the first time in nearly two years. A closely watched survey of manufacturers showed that employment in July grew at a slower rate than in June and that new orders of factory goods actually fell. Housing prices are still extremely weak.

With extended unemployment benefits scheduled to expire at the end of this year, there are still 13.9 million people out of work, 6.2 million of whom have been searching for jobs for six months or longer. Another 8.4 million are working part-time because they couldn’t find a full-time job, and 1.1 million have become so discouraged that they have stopped looking for work altogether. Including such people, the broader measure of unemployment was 16.1 percent.

In a sobering note, only 58.1 percent of the population is working, lower than at any point in 28 years.

With consumer confidence on a knife’s edge and orders slipping, employers have been reluctant to add workers. “We just don’t see where there is much incentive for companies to ramp up hiring at a time when there’s so much uncertainty gripping the country,” said Bernard Baumohl, chief global economist with the Economic Outlook Group.

Mr. Baumohl, who said the risk of a fall back into recession had certainly increased, said the most likely prospect was that the economy would continue in a “muddle through” phase. “I don’t think we’re going to see anything major happen in the labor markets until well into the fall,” he said.

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