Structural Problems Are Impeding Jobs Growth

NEW YORK ( TheStreet) -- The economy added 163,000 jobs in July. Although an improvement over the first quarter, the ranks of the unemployed swelled another 45,000. Near-term prospects for improvement seem slim, given Washington inaction.

The unemployment rate rose to 8.3%, while 348,000 workers quit looking for work and were no longer counted in the official jobless tally.

In the weakest recovery since the Great Depression, nearly the entire reduction in unemployment since October 2009 has been accomplished through a significant drop in the percentage of adults participating in the labor force -- whether working or looking for work.

Growth slowed to 1.5% in the second quarter, as consumers pulled back and the trade deficit in oil and with China continued to drag on demand. The outlook for the second half of the year is not much better. Car sales are stronger than a year ago, but are not likely to improve much further. And housing prices have risen in recent months, but on weak volumes.

The July jobs report indicates growth remains slow in the third quarter -- likely in the range of 2.5%.

Job gains were fairly evenly spread. Manufacturing added 24,000 jobs. Other big gainers included education, health care, professional services, leisure and hospitality, retail and wholesale trade, and information and communications.

Construction lost 1,000 jobs, and federal, state and local governments shed 9,000.

Gains in manufacturing production have not instigated stronger improvements in employment, largely because much of the growth is focused in high-value activity. Assembly work, outside the auto patch, remains handicapped by the exchange rate situation with the Chinese yuan.

Current Policies Hurt

Recent moves by China to further weaken its currency and to close its markets to stimulate its own flagging demand suggest matters will get worse without a substantive response from Washington.

Also, concerns about health-insurance costs once Obamacare is fully implemented are discouraging employers. Mandated services raise costs and, regardless of their merits, make adding employees more expensive at a time of great stress for most businesses.

The financial crisis in Europe and mounting problems in China's economy fan worries among U.S. businesses about a second major recession and discourage new hiring. The U.S. economy continues to expand at a torturously slow pace, and is quite vulnerable to shock waves from crises in Europe and Asia.

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