3rd month of weak hiring signals long slog ahead

[August 07, 2010]  WASHINGTON (AP) -- The nation isn't creating nearly enough jobs to reduce persistently high unemployment.

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

Making matters worse: Many of the new jobs that are being created do not pay well enough to significantly jump-start spending by shoppers and stimulate the broader economy.

The unemployment rate was stuck at 9.5 percent for the second straight month, the Labor Department said Friday. Analysts said it would probably climb back into double digits because the private sector is not creating jobs fast enough.

Private employers reported a net gain of 71,000 jobs for July -- far below the 200,000 it takes for the unemployment rate just to hold steady and keep pace with the growing work force.

Counting the jobs that were lost at the local, state and federal levels in July, the net gain was only 12,000 jobs. And on top of that, 143,000 temporary jobs with the Census Bureau for the 10-year population count came to an end.

So far this year, state and local governments wrestling with budget shortfalls have shed 169,000 jobs. And further losses are on the way -- about 20,000 to 30,000 more job cuts a month expected over the rest of the year, despite $26 billion in federal aid.

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 this year, when the benefits of most of the government's stimulus spending will start to wear off.

For now, most of them are betting the economy will continue to grow, though at a lackluster pace, through the rest of this year. Some analysts fear the recovery could fizzle altogether, though.

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

Job seekers face tough competition these days. 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.

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.

So far this year, the economy has added only 117,000 high-paying jobs in industries such as construction, manufacturing and mining. Over 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 over the past 12 months, too. Electrical engineers make an average of about $41 an hour, lawyers $62.

Arthur Santa-Maria was laid off at Intel Corp. in 2007 after 25 years as an engineer. Now, he's selling refrigerators at Sears and has all but given up on finding an engineering job, instead just trying to make a little money before retiring.

After he lost his job, the 58-year-old landed some interviews, but competition was fierce for every opening, he said. He took the Sears job even though he is paid on commission and has no health benefits.

"Usually, on Fridays and Saturdays I'll make minimum wage, but beyond that, I don't even make lunch money because no one is spending right now," he said.

The meager job growth in the economy has mainly come from the lower-paying service sector, which has generated 513,000 jobs so far 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 level 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.

Some companies that lack confidence in the durability of the recovery are turning to temporary, rather than permanent, hires. Federal-Mogul Corp., which makes car parts, has hired 1,400 workers in the United States in the past year as car sales have grown. But many of them are temporary hires, allowing the company to stay flexible and get smaller if the economy sours, said Jose Maria Alapont, CEO of the Southfield, Mich., company.

"There is a very clear recovery during the first half of the year, but there are still questions whether that will continue in the second half," Alapont said in an interview.

The bleak government report initially sent stocks falling, with investors seeking the safety of more conservative Treasury bonds, but stocks shaved their losses. The Dow Jones industrial average closed down 21 points, or 0.2 percent.

The economy lost speed in the spring, growing at just a 2.4 percent pace in the April-to-June quarter. And it's probably growing even more slowly now, analysts said. It takes about 3 percent growth to create enough jobs to keep up with population growth.

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 only 559,000 jobs.

[Associated Press; By JEANNINE AVERSA and CHRISTOPHER S. RUGABER]

AP Business Writers Christopher Leonard in St. Louis, Tom Krisher in Detroit and Tali Arbel in New York contributed to this report.

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