US job growth accelerated more than expected last month, tamping down fears the economy was sliding into a fresh recession and easing pressure on the Federal Reserve to provide more support for the weak economy.
Nonfarm payrolls increased 117,000 after slowing abruptly in the past two months, US Department of Labor data showed on Friday. The rise beat economists’ expectations for an 85,000 gain.
The unemployment rate dipped to 9.1 percent from June’s 9.2 percent, but that was because discouraged jobseekers gave up the search for work.
Still, the report was heartening after a rash of disappointing data over the past week.
“This shows that the US economy is not dead yet. We have potential to get back on track with moderate growth to a strong recovery next year,” said Kurt Karl, head of economic research and consulting at Swiss Re in New York.
Average hourly earnings rose US$0.10, the largest increase since November 2008 and good news for spending. Over the past year, earnings are up 2.3 percent, the biggest 12-month gain since October 2009.
The tenor of the report was also helped by revisions showing 56,000 more jobs were added in May and June than first thought.
A separate report showed consumer credit rose US$15.5 billion in June, the biggest gain since -August 2007 and another hopeful sign for the economy.
However, the jobs data showed the labor market still has a steep climb to regain health.
The economy needs to create at least 150,000 jobs a month to keep the unemployment rate from rising further, and only 2 million of the 8.7 million jobs that were lost during the recession have been recovered.
US President Barack Obama on Friday renewed a call for an extension of a payroll tax cut and emergency unemployment benefits to help support the economy. Republican opponents offered a prescription of budget cuts and easier regulation.
The private sector accounted for all the jobs created last month, with business payrolls rising 154,000 — an acceleration from June’s 80,000 increase. Government payrolls dropped 37,000, a ninth straight monthly decline.
While private employers showed a renewed appetite to hire last month, there are worries their enthusiasm might have been dampened by the ugly fight between Democrats and Republicans in Congress during talks to raise the country’s debt limit, which came to a head late last month and early this month.
“The fight over the debt ceiling created a new climate filled with uncertainty and anxiety that will cause businesses to ... either reduce hiring, freeze hiring or cut payrolls,” said Tony Crescenzi, portfolio manager at PIMCO in Newport Beach, California.
The poor economy has dented Obama’s popularity and ensures he will face a tough bid for reelection next year.
The president pressed lawmakers to act swiftly to spur the recovery when they return from a summer break in September.
“There is no contradiction between us taking some steps to put people to work right now and getting our long-term fiscal house in order,” Obama told veterans in Washington. “The more we grow, the easier it’s doing to be to reduce our deficit.”
The nation’s borrowing limit was raised this week in a deal that relied on spending cuts, fueling concern the economy could weaken further.
The spending pullback and scheduled expiration of the payroll tax cut and emergency jobless aid could reduce gross domestic product growth by more than a percentage point next year, analysts say.