US ECONOMY:THE US labour market did not collapse last month. That was just about the most optimistic reaction from economists after the jobs data was released yesterday.

In fact, US job creation accelerated somewhat in July after advancing at a dispiritingly slow pace over the previous two months. The relief was palpable and helped calm worries of a “double-dip” recession. But there were still serious doubts about whether the soft patch in the recovery had been overcome.

“It no longer feels like the economy is falling off the cliff,” says Michael Feroli, an economist at JPMorgan. “But this is just the start if we’re going to see any true repair of the labour market”.

The monthly report is based on two surveys, and in this case they offered mixed signals about the momentum in the jobs market. The survey of employers showed non-farm payrolls growing by 117,000 in July – the measure’s most rapid pace since April and significantly better than economists’ forecasts of 85,000 new jobs.

Almost every sector of the economy – from construction to manufacturing to retailing – recorded higher job creation last month compared with June. In addition, upward revisions were made to the extremely sluggish payroll figures recorded in May and June, suggesting the downturn at the end of the second quarter was not as bad as previously thought. However, the household survey – the second component of the report – was less comforting. The unemployment rate edged down from 9.2 per cent to 9.1 per cent, but that was because of a drop in the number in the labour force.

“Although today’s reading temporarily allays fears of a double dip, it also reinforces just how discouraging labour conditions are for job seekers,” said Ryan Wang, a US economist at HSBC.

Most economists have calculated that at least 200,000 new jobs need to be created every month to bring down the unemployment rate, a goal that at this stage in the country’s anaemic recovery still seems elusive. – Copyright The Financial Times Limited 2011