Losses in the job market are finally showing real signs of moderating. But as with most other economic data these days, Friday's employment report sent mixed messages, suggesting that while the economy may be bottoming out, recovery will likely be slow, fitful and frustrating.
The Department of Labor reported that the U.S. economy lost 247,000 jobs in July while the unemployment rate dipped to 9.4 percent from 9.5 percent. That was the smallest monthly decline in jobs since last August and provided clear evidence that the longer-term pace of job erosion is slowing markedly.
The average monthly job loss for May through July was 331,000, about half the 645,000 average decline for November through April, the department said. And while the losses were spread across many industries, the slowing rate of decline was widespread, too.
But one of the reasons for that change is that hundreds of thousands of people left the labor force.
Economists said this sort of slowing is a necessary precondition for any recovery, since it is impossible for the economy to gain traction when consumers are losing their jobs by the hundreds of thousands each month. But they also noted that a drop of 247,000 jobs is hardly a sign of good health.
"While the labor market is still struggling, the pace of decline is moderating," said analysts at Economy.com, trying to put the best face on things. "At this point, a moderation in losses is the best that can be hoped for and any movement in the right direction is welcome."
Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, N.C., said he was encouraged by the report but still thinks the unemployment rate will rise to 10.5 percent before this cycle of job losses reverses itself.
He noted that one reason for improvement in July was that General Motors Corp. and Chrysler Motors LLC restarted plants that had been shut down to save cash and adjust inventories. That gave the manufacturing sector a welcome boost but may have been a one-time bump that skewed the numbers temporarily.
Other economists said that the drop in the unemployment rate was driven by a sharp decline in the labor force as discouraged job seekers dropped out.
The number of long-term unemployed (those jobless for 27 weeks or more) rose by 584,000 over the month to 5 million. That meant that one in three unemployed people was jobless for 27 weeks or more in July, the Bureau of Labor Statistics said.
Maryland's unemployment rate rose to 7.3 percent in June, the worst it's been in a generation. The state's jobless rate for July is expected to be released on Aug. 21.
Andy Moser, assistant secretary at the Maryland Department of Labor, Licensing and Regulation, said the slight dip in the national unemployment rate is encouraging but cautioned against reading too much into a one-month decline.
"Before we get too happy, it'll be great to see two or three more months of that," Moser said.
Maryland's unemployment has been better than the national picture and surrounding states because of defense and government spending. But Moser said people are still having a difficult time finding jobs, with the state's work force centers seeing a 40 percent to 60 percent increase in demand for unemployed workers' support and services compared with last year.
"The demand is continuing and people are coming in with a multitude of issues," he said. "It's not just unemployment but somebody lost their jobs and they're in foreclosure or losing their jobs pushed them into foreclosure. And also the fact that they don't have health care and can't pay for COBRA" to extend their health insurance coverage.
Economists say it is not surprising that job losses would slow as the economy begins to bottom out and show signs of recovery. Companies have gotten the mass layoffs and restructurings out of the way and are hunkering down hoping that demand for their products returns.
Vitner said that when he talks to corporate executives they all say the same thing - while they may be done or close to done with the cutting, they have no plans to start hiring. In the past two recoveries, he noted, companies held off on hiring as long as they could, happy with how productivity gains from using fewer workers improved earnings as the economy picked up.
"Some say it may be different this time," Vitner said, "but I don't think that's going to happen."
President Barack Obama on Friday welcomed a dip in unemployment as evidence "the worst may be behind us" with the recession well into its second year.
Earlier, however, the White House said the president still expects unemployment to hit 10 percent later this year.
White House press secretary Robert Gibbs said the two positions don't contradict each other.
"I would describe the report that came out today as the least bad report that we've had in a year," Gibbs said. "But we still have a long way to go."
If laid-off workers who have given up looking for new jobs or have settled for part-time work are included, the unemployment rate would have been 16.3 percent in July. That's down from 16.5 percent in June, which was the highest on records dating to 1994.
Baltimore Sun reporter Hanah Cho and the Associated Press contributed to this article.