The economy added 163,000 new jobs in July, a better-than-expected gain that sent stocks and bonds higher even as the nation's unemployment rate rate ticked up from 8.2% to 8.3%.
Economists said the report doesn't point to significant new momentum, even though forecasters surveyed by Factset had predicted 100,000 new jobs. July's results were only slightly better than the 151,000 monthly average for the year, or even the 133,000 monthly average since employment resumed growing in 2010.
"It's modestly positive, but unless it goes over 200,000 per month it's consistent with the plodding growth track we've been on for three years,'' said Patrick O'Keefe, chief economist at J.H. Cohn, a consulting firm, who was an assistant secretary of labor during the Reagan Administration. "We're unlikely to get either a breakout or a breakdown from here.''
The improvements were concentrated in industries like bars and restaurants, up 29,000 jobs for the month, and manufacturing, which gained 25,000. Manufacturing was helped by the settlement of a strike against Lockheed Martin and fewer seasonal layoffs than usual in the auto industry, Moody's Analytics economist Marisa Di Natale said.
The change in the unemployment rate was minuscule, says Di Natale. The actual change was not 0.1 percentage points, but 0.03 points, she said.
"It went from 8.2% to 8.25%, and they rounded up to 8.3%," said Maury Harris, chief U.S economist at investment bank UBS.
With retailing employment and entertainment hiring rising, consumers appear to be spending money — but cautiously, said Diane Swonk, chief economist at Mesirow Financial in Chicago.
"It's a sign that some discretionary spending is going on,'' Swonk said. "It's not where everyone would like it to be. They're taking vacations but not spending elsewhere.''
Consumers and businesses alike have reasons to stay cautious in the months ahead.
Workers aren't getting raises, said Di Natale, adding that reported income gains were the weakest since 2010, as average weekly earnings rose rose 69 cents a week to $811.44.
Company managers are likely to be cautious because of weak recent reports on factory orders and retail sales, Swonk said.
Businesses and consumers appear to be holding back because of the uncertainty about whether Congress will allow tax cuts to expire at the end of the year, and let sharp spending cuts to take effect, she added.
The midyear slowdown marks the third straight year the economy began the year briskly and then stumbled.
Gross domestic product growth slipped to a 1.5% annual rate in the second quarter from 4.1% late last year, the Commerce Department reported last week. Consumer spending grew more slowly and government spending fell. Growth may hit 1% in the fourth quarter, according to Bank of America Merrill Lynch.
The bad news has been partly offset by improvements in housing starts, home prices and new unemployment-insurance claims. A stronger housing market may lead the private sector to faster growth next year, Moody's Analytics chief economist Mark Zandi said.
Overall, private employers added 172,000 jobs in July while governments cut 9,000, the Labor Department reported.
The economy has now added 4 million jobs since employment bottomed out 30 months ago, with 4.5 million new private sector jobs and about a half million lost government jobs. The largest chunk of government layoffs have affected teachers and other educators.
The number of unemployed was 12.8 million in July and the number of long-term unemployed, those jobless for 27 weeks or more, was 5.2 million.
The economy added an average of 225,000 jobs a month in the first quarter, but the gains slowed to fewer than half that number in the second quarter.