Some 131,000 jobs were lost and the unemployment rate remained stuck at 9.5 percent, officials said, as federal and local governments slashed jobs. The private sector was unable to offset a massive government layoff of 143,000 census-takers, with firms creating only a modest 71,000 jobs in the month. The figures were seen as yet another sign that the US economic recovery is stagnating, and that the jobs market may take years to get back on its feet.
The current pace of employment is too slow to replace the more than eight million jobs lost in the recession not in the next year or two, perhaps even not in the next five years, said Bart van Ark, chief economist of The Conference Board, a business research firm. Its unlikely that industries such as construction and manufacturing will ever return to pre-recession employment levels.
Analysts had predicted the ranks of working Americans would shrink by around 87,000 in July, helping to push the unemployment rate up to 9.6 percent.
Revisions to June figures also compounded fears. The Labor Department said 221,000 jobs had been lost versus the 125,000 earlier reported.
That piled pressure on President Barack Obama to prove his economic policies are working ahead of November midterm elections. Obamas Republican opponents leaped on the data as evidence that massive economic stimulus spending had not worked.
President Obamas economic policies have failed to create sustainable job growth, said Republican National Committee chairman Michael Steele.
The White House pointed to the distance traveled since the depths of the recession.
We have made substantial progress from the days when employment was declining by 750,000 a month, said Christina Romer, President Barack Obamas top economic advisor.
While she admitted, there will likely be more bumps in the road ahead as the economy recovers, she dismissed suggestions by some economists of a potential double-dip recession. On Wall Street, markets reacted gloomily, with the major stock indices all trading down.
For months investors have anxiously awaited any clue of where the economy is headed, with data frequently providing a confused snap shot.
That trend appears to have continued, leaving Obama and policy makers facing tough choices about whether new crisis measures are needed.
The Federal Reserves rate-setting panel meets on Tuesday, when it is expected to ponder restarting stimulus policies.
But most analysts agree the central bank will shy away from any new measures unless absolutely necessary, to avoid using one of their few remaining policy levers.
The central banks problem now is that any additional monetary stimulus will require unconventional methods, said Ryan Sweet of Moodys Economy.com and the cost and benefit trade-off of these are unclear.
But Fridays report prompted calls for the Fed to keep record low interest rates.
The Fed should remain dovish, said analysts at Societe Generale.