WASHINGTON -- Employers added 163,000 jobs in July after three months of sluggish hiring, a pleasant surprise that could signal the U.S. economy may be resilient enough to shake off a midyear slump.

The economy has added an average of 151,000 jobs a month this year, although that's not been enough to drive down the unemployment rate, which ticked up to 8.3 percent from 8.2 percent in June.

The Labor Department's July employment report did little to settle the political debate about the economy, with Obama administration officials and Gov. Mitt Romney seizing on the latest data to bolster their campaigns with less than four months to go until Election Day.

Before Friday's report, economists were increasingly worried that a slowdown in hiring and growth from April through June could get worse and develop into something more long-lasting. Now they are breathing a little easier.

"After a string of disappointing economic reports ... we'll certainly take it," said James Marple, senior economist at TD Economics.

Stocks rose sharply in midday trading. The Dow Jones industrial average added 247 points to 13,126, while the broader Standard & Poor's 500 index rose 28 points to 1,393.

The government uses two surveys to measure employment trends. Hiring is measured through a survey of businesses. The unemployment rate comes from a survey of households and is calculated by dividing the number of people who say they are unemployed by the size of the labor force. In July, more people said they were unemployed, while the size of the labor force shrank.

Economists say the business survey is more reliable.

A better outlook on hiring could make the Federal Reserve reluctant to take more action to spur growth. The Fed, which ended a two-day policy meeting Wednesday, signaled in a statement a growing inclination to take further steps if hiring doesn't pick up.

But some economists say the job gains need to be greater for the Fed to hold off.

Paul Ashworth, senior U.S. economist for Capital Economics, said July's job gains were a "vast improvement" over the past four months. Still, they were well below the average 252,000 jobs a month added from December through February.

"It also isn't strong enough to drive the unemployment rate lower, which is what the Fed really wants to see. So, on balance, we doubt this would be enough to persuade the Fed to hold fire in September," Ashworth said.

Stronger job creation could help President Barack Obama's re-election hopes. Still, the unemployment rate has been above 8 percent since his first month in office - the longest stretch on record. No president since World War II has faced re-election with unemployment over 8 percent.

In remarks at the White House, Obama said the private sector has now added 4.5 million jobs in the past 29 months. But he acknowledged there still are too many people out of work.

"We've got more work to do on their behalf," he said.

Romney, the presumptive GOP presidential nominee, focused on the increase in unemployment, as did other Republicans.

"We've now gone 42 consecutive months with the unemployment rate above 8 percent," Romney said in a statement. "Middle-class Americans deserve better, and I believe America can do better."

The economy remains weak more than three years after economists declared the recession had ended in June 2009. Growth slowed to an annual rate of 1.5 percent in the April-June quarter, down from 2 percent in the first quarter and 4.1 percent in the final three months of 2011.

U.S. growth could also be hampered further by a weaker global economy. Europe's financial crisis has pushed much of that region into a recession, while growth in China, India and Brazil has slowed.

Worries have also intensified that the U.S. economy will fall off a "fiscal cliff" at the end of the year. That's when tax increases and deep spending cuts will take effect unless Congress reaches a budget deal. A recession could follow, Fed Chairman Ben Bernanke has warned.

Those concerns provide employers "plenty of reasons for caution," said Nigel Gault, chief U.S. economist at IHS Global Insight. He expects monthly job gains will only be between 100,000 and 150,000 in the second half of this year.

The July job gains were broad-based. Manufacturing added 25,000 jobs, the most since March. Restaurants and bars added 29,000. Temporary help services added 14,100 jobs. Retailers hired 7,000 more workers. Education and health services gained 38,000. Governments cut 9,000 positions.

Average hourly wages also increased by 2 cents to $23.52 an hour. Over the past year wages have increased 1.7 percent - matching the rate of inflation.

Tania Dougherty, owner of The Little Wine Bus in New York, is looking to hire three or four new tour guides. That's because more companies are booking her daylong winery tours for employee outings.

During the financial crisis companies cut back on bonuses, raises, vacation days and other perks, Dougherty said. But employers are now realizing they need to spend more money on their workers in order to retain them, she said.

"They want to show them a good time," said Dougherty. "People are working longer hours. It's a way to reward employees. They deserve the day out and companies are realizing that."

Meanwhile, Sherry Sheppard, owner of the I Love Cupcakes store in Largo, Fla., wants to hire a new employee but is holding off until she's sure the economy is getting better.

If more people lose jobs, they'll be less likely to spend money on guilty pleasures like cupcakes, Sheppard said.

"Being that it's an election year, it's hard to tell how the economy is doing," Sheppard says. "Maybe after the election we'll get a better picture."

Here are the top 10 big cities for jobs, according to Forbes:
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  • 10. Oklahoma, Oklahoma City

  • 9. Nashville-Davidson-Murfreesboro-Franklin, Tennessee

  • 8. Pittsburgh, Pennsylvania

  • 7. Raleigh-Cary, North Carolina

  • 6. Dallas-Plano-Irving, Texas

  • 5. San Jose-Sunnyvale-Santa Clara, California

  • 4. Fort Worth-Arlington, Texas

  • 3. Salt Lake City, Utah

  • 2. Houston-Sugar Land-Baytown, Texas

  • 1. Austin-Round Rock-San Marcos, Texas

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Richard Trumka, president of the AFL-CIO, said the following in a statement:

Given the depth of the recession and the damage done by thirty years of anti-worker policies, we knew recovery would be slow and difficult. But we did not dream that Republicans in Congress would take every opportunity to slow and stymie the recovery process from day one – cynically hoping that Americans would blame the President for the damage they inflict on the economy.

The key to building a durable recovery that leads to long-term shared prosperity is empowering workers to share the benefits of productivity growth. But Republicans continue to obstruct vital policies aimed at creating jobs and restoring growth while they hold the middle class hostage to their demands for more tax cuts to benefit the richest two percent of Americans. Their stubborn and short-sighted obstruction of any measures that might boost job creation puts our recovery at risk.

--Bonnie Kavoussi

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Wells Fargo economists Mark Vitner and Sarah Watt wrote the following in a research note:

The best way to look at the data is to average the first seven months of the year, which shows nonfarm payrolls rising by an average of 151,000 per month, which is a decent pace, but not enough to keep the unemployment rate from rising.... The employment-population ratio fell 0.2 percentage points to 58.4, which matches the low for the year.

--Bonnie Kavoussi

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Morgan Stanley economists David Greenlaw and Ted Wieseman wrote in a research note that they fear that the addition of 163,000 jobs this month was due to special seasonal factors:

Some of the upside in July payrolls appeared to be attributable to special factors. For example, a sizeable portion of the 25,000 rise in the manufacturing sector seems to be related to seasonal adjustment issues. Also, a 29,000 rise in the restaurant category is probably reflective of seasonal noise.... We are concerned that special factors were at work in July and fear a payback in next month's report.

--Bonnie Kavoussi

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From the satirical newspaper The Onion:

"Listen, if it's meant to be, it’ll happen," said Fed chairman Ben Bernanke, adding that there’s no point in purchasing new mortgage-backed securities or keeping the federal funds rate near zero percent "if both parties don't want this to work." "We can't spend all our time and energy trying to force this. We have to let them do their own thing, and if they don't come back, then maybe we were just never meant to be together."

--Bonnie Kavoussi

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From Dean Baker, co-director of the Center for Economic and Policy Research:

With construction getting stronger and retail sales likely improving in the fall, it is reasonable to expect job growth in the range of 160,000-180,000 over the rest of the year. This is better than the last few months, but it will take a decade at this pace to make up the jobs deficit.

--Bonnie Kavoussi

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From Joseph Brusuelas, senior economist at Bloomberg LP:

@ joebrusuelas : The only chart that matters. US labor slack deteriorating. Real u-rate likely much higher higher than 8.3%. http://t.co/HOtWT39K #economy $$

--Bonnie Kavoussi

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From Tom Porcelli, chief U.S. economist at RBC Capital Markets:

From our perspective little has changed.... Ultimately, we still remain in a backdrop where productivity and profit growth are slowing. Such a combination has typically ushered in a deceleration in job growth.... The challenge from a spending perspective remains wages, which slowed on a year-on-year basis to 1.3% from 1.5%. So not only do you have a poor trend in nominal terms, but in real terms wages are now in negative terrain for the fifth straight month. Again, as we said at the onset, this report is hardly something to celebrate.... All we’ve done over recent months is bounce along at the lows.

--Bonnie Kavoussi

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The ISM manufacturing and non-manufacturing indices were released soon after the jobs report, and they also indicate slower economic growth.

From Jim O'Sullivan, chief U.S. economist at High Frequency Economics:

The data look consistent with continued sluggish growth, with no collapse but no significant new strength either. The readings for the employment indexes alone look weaker than seems consistent with this morning's solid payrolls data.

--Bonnie Kavoussi

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From Joseph Brusuelas, senior economist at Bloomberg LP:

The unemployment rate increased fractionally to 8.3% (8.254) from 8.2% (8.217), despite 348,000 workers that gave up looking for work last month. The U-6, or what I consider to be the real unemployment rate increased to 15 percent.

These data are likely to be a harbinger of things to come as the unemployment rate probably inches upward toward 8.5 percent over the next few months as individuals that have exhausted their unemployment benefits trickle back into the labor market. Firms are more likely shed more workers due to a slowing economy and to hedge against future risk associated the coming domestic tax hike and the extended game of policy brinksmanship in Europe over the probable necessity of a Spanish sovereign bailout.

--Bonnie Kavoussi

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From Michelle Meyer, senior U.S. economist at Bank of America:

The economy added 163,000 jobs in July, above consensus expectations of 100,000. While this was notably better than expected, the guts of the report were soft. The unemployment rate edged higher to 8.3% as a drop in the labor force was more than offset by a decline in household employment. In addition, the work week was unchanged and wage growth was sluggish. We continue to expect growth to slow in the second half of the year as the uncertainty shock from the fiscal cliff weighs on corporate investment. This should ultimately trigger additional Fed easing, in our view. That said, today's report may have bought the Fed some time.

--Bonnie Kavoussi

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From Stephen Bronars, senior economist at Welch Consulting:

@ SBronars : Not convinced the labor market is weak? Employment to population ratio has fallen even for college graduates in past 2 years 72.8 to 72.7

--Bonnie Kavoussi

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From Robert C. King, economist at the Jerome Levy Forecasting Center:

Consistently in this recovery, declines in unemployment have been more greatly attributable to unemployed workers dropping out of the labor force than finding jobs, a testament to the depressed rate of hiring by firms. July was no different. According to the BLS, once you have been unemployed for more than three months, you are more likely to leave the labor force than to find work. Unfortunately, this situation applies to more than half of the current ranks of the unemployed. The key number to watch is the employment-to-population ratio, which takes into account changes in the labor force as well as changes in unemployment. This number stabilized in 2010, but has not budged from its close to 30-year low level since then.

--Bonnie Kavoussi

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The economists at Goldman Sachs wrote in a research note that in light of the jobs report, they expect that the Federal Reserve will say that it expects to keep interest rates near zero until 2015, rather than embark on another round of bond-buying:

We continue to expect some additional easing at the September FOMC meeting, although we think that this meeting will more likely result in an extension of rate guidance to mid 2015 than in QE3.

--Bonnie Kavoussi

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Here are some more charts putting jobs growth in perspective, from the Center for Budget and Policy Priorities. Overall, they show how weak this economic recovery has been for workers.

--Bonnie Kavoussi

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Check out this new chart from the Hamilton Project of the ratio of government employment to the population. It shows how much the government has been shrinking during the economic recovery, withdrawing support from the economy when it arguably needs it most.

--Bonnie Kavoussi

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From Nigel Gault, chief U.S. economist at IHS Global Insight:

The report will alleviate fears that the US might be tipping back into recession. But uncertainties over the strength of global growth, the Eurozone crisis, the fiscal cliff and the November elections are giving plenty of reasons for caution. We expect subdued monthly job creation in the 100,000-150,000 region in the second half of the year.

We do not believe that this report on its own is strong enough to dissuade the Fed from introducing a new quantitative easing program (QEIII) at its next meeting (September 13). But it does raise the importance of the next employment report (due September 7). If that is sufficiently strong (better again than this month's report) the Fed might decide to wait and see rather than take action. But our baseline case remains QEIII in September.

--Bonnie Kavoussi

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From Jonathan Chait, political columnist at New York Magazine:

History will record that the economic elite has viewed the economic crisis from a perspective of detached complacency.... It is more akin to a famine in Africa. For millions and millions of Americans, the economic crisis is the worst event of their lives. They have lost jobs, homes, health insurance, opportunities for their children, seen their skills deteriorate, and lost their sense of self-worth. But from the perspective of those in a position to alleviate their suffering, the crisis is merely a sad and distant tragedy.

--Bonnie Kavoussi

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Alan Krueger, chairman of the White House's Council of Economic Advisers, subtly placed the blame for the weak jobs report on Congress:

While there is more work that remains to be done, today’s employment report provides further evidence that the U.S. economy is continuing to recover from the worst downturn since the Great Depression. It is critical that we continue the policies that build an economy that works for the middle class as we dig our way out of the deep hole that was caused by the severe recession that began in December 2007. To build on the progress of the last few years, President Obama has proposed an extension of middle class tax cuts that would prevent the typical middle class family from facing a $2,200 tax increase next year. In addition, to create more jobs in particularly hard-hit sectors, President Obama continues to support the elements of the American Jobs Act that have not yet passed, including further investment in infrastructure to rebuild our Nation’s ports, roads and highways, and assistance to State and local governments to prevent layoffs and rehire hundreds of thousands of teachers and first responders.

Note Krueger's emphasis on how Obama "has proposed" and "continues to support" policies that would help create jobs, but that Congress has blocked.

--Bonnie Kavoussi

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From Sudeep Reddy, economics reporter at the Wall Street Journal:

@ Reddy : US classrooms had 220,000 fewer teachers in 2011 than in '09, for 40% of the drop in public-sector jobs in that period. http://t.co/luCERBB0

This is "creating a skills gap for the next generation," wrote Betsey Stevenson, economics professor at the University of Michigan, on Twitter.

--Bonnie Kavoussi

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From Sudeep Reddy, economics reporter at the Wall Street Journal:

@ Reddy : July jobless rate for people 25+ with bachelor's degree steady at 4.1%. High school grads: 8.7% (up 0.3). No h.s. diploma ticks up to 12.7%.

--Bonnie Kavoussi

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The S&P 500 is up 1.39 percent as of 9:36 a.m., and the Dow Jones Industrial Average is up 169.61 points, or 1.32 percent, according to Thomson Reuters.

From CNBC:

Stocks are rallying at the open, snapping four straight sessions of losses, after the better-than-expected July jobs report provided some relief for markets worried about economic growth but did not take the possibility of additional Fed action completely off the table.

--Bonnie Kavoussi

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From Betsey Stevenson, economics professor at the University of Michigan:

@ BetseyStevenson : Under Bush we had average job growth of 66K jobs per month prior to 2008, govt grew, taxes fell, and the surplus we once had evaporated

--Bonnie Kavoussi

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From Jim Tankersley, economic correspondent at National Journal:

In January 2001, Bill Clinton’s final month in office, 132.4 million Americans were employed. Eleven years and six months later, that number has grown … all the way to 133 million. A whopping 600,000 more Americans have jobs today than at the dawn of the 21st Century.

In the meantime, more than 11 million workers have entered the labor force. The number of Americans of working age has grown by 35 million. This is what a Lost Decade looks like in the job market — what a small recession and a massive financial crisis, interrupted by historically meager job growth, has wrought on America’s workers.

You can read his full article here.

--Bonnie Kavoussi

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Some unemployment workers are getting laid off, write The Huffington Post's Arthur Delaney and Greg Rosalsky. From their article:

The layoffs at Michigan's workforce agency come not because the economy's bad, but because it's supposedly getting better: The state's unemployment rate has fallen to 8.6 percent, down from 10.6 percent just one year ago. The agency says fewer Michiganders are filing for unemployment, so it needs fewer workers to process the claims.

You can read the full article here.

--Bonnie Kavoussi

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@ JustinWolfers : Pity the unemployed.

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From Jed Kolko, chief economist at Trulia:

Housing is clearly not leading the jobs recovery. In the last year, the economy added 1.8 million jobs, but added only 5,000 construction jobs. Construction employment was down 2.1% versus 3 months ago (annualized rate), compared with overall employment rising 0.9% (annualized rate) over the same period.

But there still is some good news:

Among 25-34 year-olds, the prime age group for housing demand, 74.5% were employed in July, well up from 73.2% one year ago; their unemployment rate dropped to 8.2% from 9.7% one year ago. The job market has improved a lot in the past year for this prime age group for housing demand.

--Bonnie Kavoussi

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From Jim O'Sullivan, chief U.S. economist at High Frequency Economics:

The data are consistent with an economy that, while not growing strongly, is not continuing to weaken sharply either. Smoothing out the data, the trend is probably not strong enough to satisfy the Fed.

--Bonnie Kavoussi

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From Paul Ashworth, chief U.S. economist at Capital Economics:

Overall, July's 163,000 gain in payrolls is obviously a vast improvement on what we've seen over the past few months. But equally it is still well short of the 250,000+ gains we were seeing at the start of this year. It also isn't strong enough to drive the unemployment rate lower, which is what the Fed really wants to see. So, on balance, we doubt this would be enough to persuade the Fed to hold fire in September.

--Bonnie Kavoussi

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From Justin Wolfers, economics professor at the University of Michigan:

@ JustinWolfers : Some context. Net private sector job losses under Bush: -646k. Net private sector job gains under Obama: +332k.

--Bonnie Kavoussi

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From Betsey Stevenson, economics professor at the University of Michigan:

@ BetseyStevenson : There are fewer long-term unemp'd, but among them are many who still want to work, but who haven't worked in a very long time.

--Bonnie Kavoussi

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