Payrolls fall less than expected; July unemployment rate drops

WASHINGTON -- Employers shed 247,000 jobs in July, fewest in nearly a year, bolstering forecasts for a third-quarter economic recovery.

Some economists, however, say the numbers were skewed by an unusual flurry of job additions in the automobile industry.

The unemployment rate fell to 9.4% from 9.5% in June, as 422,000 Americans left the labor force, including discouraged workers who gave up their job searches, according to the Bureau of Labor Statistics.

The 247,000 payroll jobs lost were the fewest since last August and handily beat analysts' projections of about 325,000. Manufacturing, finance and professional services cut substantially fewer workers than expected.

"It's definitely encouraging," says UBS economist Jim O'Sullivan. "It's almost an average recession number, but coming from a deep recession, we're at least moving in the right direction. You have actually seen a turning point."

Along with a bottoming in home sales and a rising stock market, among other indicators, moderating job losses are "consistent with an economy heading toward" a recovery in the third quarter, O'Sullivan says.

"Today, we're pointed in the right direction," President Obama said in brief remarks at the White House hours after the report was released. "While we've rescued our economy from catastrophe, we've also begun to build a new foundation for growth."

Even so, Obama said: "We have a lot further to go. As far as I'm concerned, we will not have a true recovery until we stop losing jobs." He also said he won't rest until "every American that is looking for a job can find one."

"We have a steep mountain to climb and we started in a very deep valley."

Earlier, presidential spokesman Robert Gibbs told reporters there remains plenty of work to do despite the upbeat report.

He said the report "is more evidence that we have pulled back form the edge" of a depression. At the same time, he said Obama still believes the unemployment rate, which is a lagging indicator, will hit 10% later this year.