Further Analysis of Jobs Shows Deeper Bad News

from Reuters:

(Reuters) - Friday's employment report provided an odd mix of unpleasant surprises that add another question mark to the pace of economic recovery.
Companies cut back on temporary hires, a segment normally considered a harbinger of future hiring. Government jobs dried up much faster than anticipated and not just because it saw the end of short-term census jobs.
The jobless rate held steady at 9.5 percent, defying expectations for a slight increase, but that was only because thousands more people dropped out of the labor force.
* Temporary jobs dropped by 5,600, reversing a streak of strong gains that economists had viewed as a hopeful sign that hiring would pick up.
* Normally, companies load up on temps at the beginning of a recovery when they are waiting for confirmation that growth is gaining momentum. This recovery has been unusual in that temporary hiring did not herald a jump in private hiring.
* Private hiring totaled a lackluster 71,000 in July, below expectations for 90,000 in a Reuters poll. June's tally was revised down to just 31,000 from an initially reported 83,000.
* Government hiring was another worrisome sign. The loss of 202,000 positions reflected the loss of 143,000 temporary Census jobs.
* The total also included 38,000 jobs lost in local government. For most municipalities, the fiscal year began on July 1, and government associations have been warning that huge budget gaps would force aggressive job and spending cuts. July's report suggests local governments got a quick start.

Note that temp jobs, which are a leading indicator, are also slowing appreciably!
and WSJ:
One worrisome sign from Friday's report: Temporary-help jobs, typically a leading indicator for the rest of the labor market, fell in July. Temporary employment declined 5,600 after nine straight months of growth.
Public reports from the largest staffing firms still show growth in the temporary sector.
The government's figures would suggest "momentum has slowed dramatically," says Adecco's Mr. Gilliam. "If that's the case and that's where we're going for the next couple of months, it suggests a step back in the job-market recovery."
A weak labor market will keep incomes—and consumer spending, which accounts for 70% of U.S. economic output—under pressure. The Fed said Friday that consumer credit declined at a 0.7% annual rate in June as consumers continued to pay down debt. Revolving credit, which is mostly credit-card borrowing, fell at a 6.5% rate, the Fed said.
About 6.6 million people were jobless for more than 27 weeks in July, accounting for 44.9% of all unemployed. Workers who are finding positions after long searches are taking pay cuts to make ends meet.