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."
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