WASHINGTON — Friday's mixed jobs report from the Labor Department was the latest in a series of signs that the U.S. economy remains locked in a frustrating cycle of crippled growth that's better than the recent recession but not strong enough to boost employment much.
The phasing out of 225,000 temporary census workers left total U.S. payrolls down by 125,000 jobs in June, but the private sector expanded by 83,000 jobs and the nation's unemployment rate dropped to 9.5 percent, the lowest level since last July, the Bureau of Labor Statistics reported.
While the census cutback led to the first monthly reduction in total U.S. jobs in six months, the expansion of private-sector employment for a sixth consecutive month confirmed that the economy continues its slow recovery from the Great Recession, which began in December 2007.
"All told, our economy has created nearly 600,000 private-sector jobs this year. That's a stark turnaround from the first six months of last year, when we lost 3.7 million jobs at the height of the recession," President Barack Obama said Friday. "Now, make no mistake: We are headed in the right direction. But ... we're not headed there fast enough."
The census job drop was no surprise. What was surprising was the unemployment rate falling to 9.5 percent, a reduction of two-tenths of a percentage point. The new rate is six-tenths of a point lower than its high point last year, but the drop was caused by a large exodus of people from the work force amid soft hiring.
While pessimistic talk is widespread about the risk of returning to a recession, most analysts think that slow growth will continue but unemployment will remain high and consumer confidence shaky.
"These data support the view that the economy's acceleration out of recession has reached an inflection point, with real GDP settling into a 2 3/4 percent and 3 percent annualized growth pace," Alan Levenson, the chief economist for T. Rowe Price Associates in Baltimore, wrote about the June jobs report. "In this case, the pace of job growth should improve slowly over the second half of the year, rising toward plus-150,000 per month."
To be sure, some good things are happening.
"Companies are rebuilding inventories. Exports of capital goods remain strong. Corporate profits are rebounding, and cash flow is at a record high. This adds up to slow growth, not a double dip recession," Ed Yardeni, a noted financial analyst, said in a report Thursday.
Other positive trends emerged from the June private-employment numbers. The administrative services sector added 41,000 jobs, and business and professional services were up by 46,000. Both are signs that white-collar employment is picking up.
Still, Friday's jobs report included reminders of the pain that Americans are feeling coast to coast. Payroll employment remains down 7.5 million from the pre-recession peak. The number of long-term unemployed — people jobless for 27 weeks or more — was largely unchanged at a record 6.8 million. These jobless people make up 45.5 percent of all unemployed workers.
The continued high unemployment is likely to heighten tensions in Washington, where Republican senators, concerned about mounting federal budget deficits, repeatedly have frustrated Democratic attempts to extend jobless benefits for 1.3 million American whose benefits have expired.
"We face an unacceptably high and persistent unemployment rate for years to come, including a rate between 9.5 percent and 10 percent through the end of 2011," said Larry Mishel, the president of the Economic Policy Institute, a liberal research organization. He favors more federal stimulus spending to invigorate the economy.
Mark Zandi, the chief economist for Moody's Analytics, a prominent forecasting firm, advised the House of Representatives Budget Committee on Thursday that the economy remains at risk of sliding back into recession. While he didn't expect that to happen, he said, the risk remains high enough that Washington should inject another $80 billion in stimulus spending soon, just in case.
"It would be prudent risk management on erring on the side of doing too much rather than doing too little over the next six months," Zandi said.
Friday's soft numbers in sectors such as construction and manufacturing are also likely to spark debate about additional stimulus spending. The construction sector, hobbled by commercial real estate problems and a moribund housing market, lost 22,000 jobs in June. Manufacturing, a bright spot of late, added only 9,000 jobs last month, a tepid pace that reflects a slowdown in output. The manufacturing workweek also declined by half an hour in June.
The weak job situation is far broader than the unemployment rate, and it explains why consumers are still wary of spending.
In a survey the Pew Research Center released Wednesday, 62 percent of respondents said they'd cut back on spending since the recession began. Fifty-five percent reported that they either were unemployed, had had their wages cut or were forced to settle for part-time work at some point during the past 30 months.
"Until consumers at least see the pace of job growth pick up, and see that it is sustainable, you're not going to get a boost in confidence," said Lynn Franco, the director of the Consumer Research Center at the Conference Board in New York, a business research center. "There is a hesitancy to spend. You continue to see weak demand."
The Conference Board's index of consumer confidence, released Tuesday, showed a nearly 10-point drop after three consecutive months of gains. That's significant, because consumption drives 70 percent of U.S. economic activity.
Few analysts expect the recovery to strengthen anytime soon.
"I expect the unemployment rate to drift back into the double digits later this year. The economy won't consistently generate enough jobs to meaningfully bring down unemployment until spring 2011," Zandi said in an interview with McClatchy. "Large and midsized businesses are enjoying the profit growth that in times past has induced them to hire aggressively, but they lack the confidence.
"It is difficult for business owners to forget the near-death experiences they suffered not long ago."In addition, he said that small businesses lacked access to credit to ramp up hiring.
"I do expect with time, and hopefully some reasonably good policymaking, that businesses will get some of those animal spirits back and start hiring more aggressively in 2011," Zandi said.
(Andrew Seidman contributed to this report.)
JUNE BY THE NUMBERS
- Construction, down 22,000.
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