Aug. 5 (Bloomberg) -- Employers added more jobs than forecast in July, the jobless rate fell and wages climbed, easing concern the U.S. economy is grinding to a halt. Payrolls rose by 117,000 workers after a 46,000 increase in June that was more than originally estimated, Labor Department data showed today in Washington. The median estimate in a Bloomberg News survey called for a July gain of 85,000. The jobless rate dropped to 9.1 percent as more Americans left the labor force, while average hourly earnings climbed 0.4 percent.
Job gains may need to accelerate further to bolster consumer spending, which rose last quarter at the slowest pace in two years. Weaker growth puts more pressure on Federal Reserve policy makers meeting next week to try to steer the worlds largest economy away from another recession at a time when inflation is also accelerating and stocks are slumping.
The labor market, despite some gains, remains in a rather fragile state, Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. Rupkey projected payrolls would increase by 130,000.
Businesses remain cautious and it will take a number of years before the unemployment rate gets back to pre-recession levels. The anxiety level is high and risks of a slowdown are everywhere.
Estimates of the 88 economists surveyed by Bloomberg for overall payrolls ranged from no change to a 150,000 increase.
The unemployment rate was forecast to hold at 9.2 percent, according to the survey median. Estimates ranged from 9.1 percent to 9.4 percent.
Labor Force
The jobless rate declined as 193,000 people left the labor force and the number of unemployed dropped by 156,000. The share of the eligible population holding a job declined to 58.1 percent, the lowest since July 1983.
Private hiring, which excludes government agencies, climbed 154,000 last month after a 80,000 gain. It was projected to rise by 113,000, the survey showed.
Factory payrolls jumped by 24,000 in July after an 11,000 gain in the previous month. Half the increase was in the auto industry, which had fewer seasonal layoffs than typical for July.
Employment at service-providers increased 75,000 in July, the most in three months. Construction employment rose by 8,000 workers, the biggest gain since February.
Government payrolls decreased by 37,000 in July, the ninth straight drop. Employment at state governments dropped 23,000 last month, almost entirely due to a partial shutdown of the Minnesota government.
Minnesota Shutdown
About 23,000 Minnesota state workers were temporarily laid off during a three-week shutdown that ended July 21 after the Republican-controlled legislature passed a budget as part of a broad agreement that included more spending while preventing a tax increase.
Average hourly earnings climbed 10 cents to $23.13, todays report showed. The average work week for all workers held at 34.3 hours.
The so-called underemployment rate -- which includes part- time workers whod prefer a full-time position and people who want work but have given up looking -- decreased to 16.1 percent from 16.2 percent.
The economy grew at a less-than-forecast 1.3 percent pace in the second quarter following revised growth of 0.4 percent in the first three months of the year that was less than previously estimated, Commerce Department figures showed last week. Consumer spending grew 0.1 percent, the smallest gain since the second quarter of 2009, the final months of the recession.
Spending Slows
The two-year-old recoverys staying power may be diminishing as consumers and the government pare spending, say five of the nine economists on the academic panel that dates recessions.
Payroll increases of around 125,000 a month are needed to keep the unemployment rate steady, while about 200,000 a month would bring it down a percentage point over a year, according to Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut.
In his semi-annual testimony to Congress last month, Federal Reserve Chairman Ben S. Bernanke said the economy still needs a good deal of support.
The most recent data attest to the continuing weakness of the labor market, Bernanke said on July 13. Wages are very stagnant and thats affecting consumer spending and consumer confidence. There is also ongoing uncertainty about the durability of the recovery.
Europe Risk
Some companies are firing workers to keep costs down as the economy slows and uncertainty builds over the debt ceiling, European default risk and regulatory and tax costs.
Cisco Systems Inc., the largest networking-equipment maker, plans to eliminate about 6,500 jobs, or 9 percent of its full- time global workforce, to help trim $1 billion in annual costs and step up profit growth.
The job cuts will come from across the company and arent concentrated in a single unit, said Karen Tillman, a company spokeswoman, in an interview July 18. The company said affected workers in the U.S. and Canada would be notified this week.
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