Have we seen this summer movie before?
Once again, July brought a surprise burst of hiring after growing worry
that the nation was slipping into a second recession. Employment numbers
released Friday showed governments and businesses hired about 163,000 more
people than in June, much better than analysts expected.
It was basically the same plot twist from last summer's economic drama,
when a weakening economy seemed on the verge of undoing a slow but steady
recovery. But a stronger-than-expected jobs report in July 2011 basically
marked a turnaround, with payrolls picking up significantly through the fall
and winter until stalling again in the spring.
"We shouldn't have been as worried about the weaker earlier numbers,"
Mark Vitner, an economist with Wells Fargo, said of the latest employment
report. July's job growth was larger than May and June combined but still far
short of the 250,000 or so economists say would signal a healthy hiring
market.
"I don't know if I'd call today's numbers strong," said Sean Snaith, an
economist at the University of Central Florida. "But expectations had been
pushed down so long that it was kind of a positive surprise."
Friday's report contained at least one glaring reason for worry: the
national unemployment rate ticked higher, and for troubling reasons. A
national survey of households found declines in both people working and people
looking for work. That pushed the unemployment rate up to 8.3 percent. It
would have been slightly higher -- just shy of 8.4 percent -- if the number of
job seekers had held steady.
South Florida and the Sunshine State will not receive their July
employment numbers until the middle of August. At the moment, Miami-Dade is
performing worse than the nation, with 9.5 percent unemployment. Broward is
doing better, at 7.5 percent. And Florida is doing slightly worse, with an 8.6
percent jobless rate.
Investors mostly embraced Friday's national employment numbers, though
Wall Street often rallies when it smells enough blood in the economic waters.
Many stock watchers expect the Federal Reserve to buy up securities and
other investments if the economy doesn't improve, and July's job report may
not have enough encouraging news to convince the Fed to hold its fire. Or
Friday's rally could have been fueled by a payroll number that clearly
surprised to the upside: a consensus of analysts polled by Reuters predicted
only 100,000 new jobs.
Vitner blamed a large part of the surprise on how Washington's Bureau of
Labor Statistics adjusts the hiring numbers for seasonal changes in the
economy in the spring and summer. Even when the unemployment rate was dropping
on paper earlier this year, Vitner said he saw a climb coming. "I predicted
unemployment would top out at 8.4 percent this summer,'' he said.
Vitner and others said the economy finds itself pretty much where it was
at the start of the summer: limping along in a recovery that will probably
continue, but not at a pace worth celebrating.
"The economy will start ramping up in 2014. It's the nature of recoveries
coming out of a financial crisis-- it just takes time," said Karl Kuykendall,
an economist with IHS Global Insight. "We're certainly in recovery. It will be
a long process."
Just like last summer, the economy faces two major risks: Washington and
Europe. In August 2011, Wall Street was gyrating through stock dives and
surges as European leaders tried to reassure investors that they had a plan
for a growing debt crisis. The crisis continues.
This time last year, Wall Street was scared Washington would fail to
extend the nation's borrowing limits and force the Treasury to slash spending
or default on its debt payments. A compromise averted that scenario, but not
before the United States lost its AAA credit rating and lawmakers agreed to
automatic spending cuts and tax hikes.
Those measures take effect in January if Congress and the White House
can't agree to another plan, and the so-called "fiscal cliff" has analysts
warning of another economic trauma to come. The concerns are heightened by the
public sector's poor hiring record during the downturn:
"We continue to believe that the uncertainty from the fiscal cliff
combined with spillover from the crisis in Europe will result in slower growth
in the U.S.," Michelle Meyer, a Bank of America Merrill Lynch economist, wrote
to clients Friday. "Businesses will likely hold off capital expenditures, and
households will likely postpone big-ticket purchases."
