After heading higher for three straight months, the nation’s unemployment rate declined to 9.1 percent in July, down from 9.2 percent in June, according to figures released Friday by the U.S. Department of Labor. The economy added 117,000 jobs last month.
July’s numbers beat analysts’ forecasts. They were expecting the employers to add between 85,000 and 90,000 jobs to their payrolls and the rate to remain unchanged.
Investors are hoping the news will help dispel fears of a double-dip recession and quell some of the sell-off frenzy seen in the stock market yesterday, which led to the largest one-day drop in the Dow since the financial upheaval following Lehman Brothers’ collapse.
July’s job growth was a stark improvement over the previous month, even after the Labor Department revised its previously reported estimate upward from 18,000 to 40,000. But economists say the economy needs 250,000 new jobs per month, on a sustained basis, just to reabsorb all the jobs lost since the recession.
Extended periods of unemployment have become one of the primary default triggers in the mortgage world and one of the biggest challenges for lenders and servicers trying to get a handle on serious delinquencies.
According to Keith Hall, commissioner of the Bureau of Labor Statistics, there are 13.9 million people counted as unemployed in the U.S. As of the end of July, 6.2 million had been without a job for longer than four months.
Last month, the federal government instituted new policies to help unemployed homeowners avoid foreclosure by expanding the mortgage forbearance period to 12 months for the Federal Housing Administration’s loss mitigation program and the administration’s Making Home Affordable program.
This week, 28 congressmen penned a letter to key regulators, including the heads of the Federal Housing Finance Agency and the U.S. Treasury, urging them to also make the extended 12-month forbearance period available to unemployed homeowners whose loans are owned or guaranteed by Fannie Mae and Freddie Mac.
Paul Dales, senior U.S. economist with the research firm Capital Economics, says while July’s employment report “will reduce fears that the economy is heading for another recession and could stop the rot in the financial markets, at least temporarily,” there are clear signs in the numbers that the labor market “remains worryingly weak.”
He explained that the unemployment rate fell only because of a 193,000 decline in the labor force, as some people fell off the official radar because they’ve given up looking for work.
Dales pointed out that the employment-to-population rate, which is not affected by changes in the labor force, actually fell. It dropped from 58.2 percent to 58.1 percent, its lowest reading in 28 years.
“The bigger picture, then, is that two years after the recession ended the labor market has not really recovered at all, and may even have gone backwards,” Dales said. “Even though immediate recession fears may fade a little on the back of this report, the key point is that the economy is still struggling and will continue to do so next year too.”
This article is by DSNews.com.
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