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Originally published Friday, August 5, 2011 at 5:54 PM

Jobless rate dips slightly, but economic picture remains grim

The nation added 117,000 new jobs last month and the official unemployment rate dipped fractionally, but the underlying data of the latest...

Tribune Washington Bureau

quotes Unemployment numbers are comprised of those that are in the job market for the past 30... Read more

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WASHINGTON — The nation added 117,000 new jobs last month and the official unemployment rate dipped fractionally, but the underlying data of the latest government report provided more evidence of the economy's continuing weakness and stoked fears that it could slip back into recession.

The new jobs figure — stronger than many analysts had predicted — was the highest tally since April and helped pull the July unemployment rate down to 9.1 percent from 9.2 percent in June, reversing three straight months of increases.

But welcome as the gains were, they still left the average job growth over the last three months at just 72,000 — only about half of what's needed each month to keep pace with the growing population of workers.

And the rate drop masked further long-term deterioration in the nation's labor market: The decline was primarily because hundreds of thousands of workers dropped out of the job market, apparently too discouraged or seeing few opportunities worth chasing. Under the government's statistical rules, these dropouts are not counted among the 14 million officially listed as unemployed.

The so-called labor participation rate — the share of the U.S. working-age population that have jobs or are actively looking for work — fell to a new three-decade low of 63.9 percent. Friday's report showed the population of people 16 and over rose by 1.8 million from July 2010 to July 2011. But during that same period, those in the labor market actually dropped by 400,000.

In addition, an estimated 8.4 million workers wanted full-time jobs but have no choice but to work part time.

"It's unprecedented. There are a lot of people who could be working who are not," said Sophia Koropeckyj, a labor economist at Moody's Analytics. "Clearly, the 9.1 percent does not at all reflect what is going on.

"We're barely holding on to the recovery," she said. "It wouldn't take much for us to drop into recession."

Many analysts and investors were bracing for the worst on jobs after Thursday's huge Wall Street sell-off, which came after a series of grim economic indicators in the U.S. and deepening debt troubles in Europe that sharply raised fears of a double-dip recession.

The numbers in Friday's jobs report were not disastrous and in that sense almost brought a sigh of relief. Stocks swung wildly through the day, eventually closing with little change. But few seemed any more reassured about the overall state of the economy or the way forward.

"The current situation looks extremely bad," said Roger Farmer, head of the economics department at the University of California, Los Angeles. The Dow is down about 11 percent from its spring high and unless there's a sharp upturn in confidence, he said, the waning sentiment among investors is certain to produce a negative "wealth effect," dragging down already weak consumer spending and the broader economy — and with it, employment.

Farmer sees a 50 percent chance of the U.S. falling into recession in the next six months.

Seeking to strike an upbeat note, President Obama said, "Things will get better. And we're going to get there together."

Obama said he hoped that after the August recess, Congress would work in a more constructive way than it did on the debt ceiling.

"I want to move quickly on things that will help the economy create jobs right now," he said. "The more we grow, the easier it will be to reduce our deficits."

Beyond the personal and family pain of joblessness, both the officially unemployed and the shadow-unemployed constitute a major and apparently growing drag on the economy as a whole and on those who do have jobs.

The cost of government safety-net programs, including unemployment insurance and food stamps, rises. Equally important, the unpaid taxes of the jobless must be made up in the form of reduced government services, higher deficits, higher levies on those still employed, or some combination of the three.

Jim Chamberlain, a volunteer at Forty Plus of Greater Washington, D.C., a job networking and support group for professionals, sees some of the unemployed going back to school, others retiring and still others just walking away from an unforgiving labor market. It's hard to know how they're holding up, he said. "The folks who drop out aren't visible."

Labor Secretary Hilda Solis took note of the large numbers leaving the job market. "We want them to come back; we don't want them to be discouraged," she said, adding that the government has one-stop centers to help workers in their job search.

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