With the departure of thousands of temporary Census workers and thousands more let go by state and local governments, businesses could not rescue the American labor market in July. Overall, the nation lost 131,000 jobs last month, according to the Department of Labor, which also said that June was far weaker than previously indicated. Private employers added 71,000 jobs last month, but those figures were overtaken by the 143,000 cut as the Census wound down. It is also about half the number that economists say is needed to simply accommodate population growth, so the tepid job increases cannot begin to plug the hole created by the loss of more than eight million jobs during the recession. The unemployment rate, in fact, remained stuck at 9.5 percent in July. 'The private sector is still hobbled,' said Robert A. Dye, senior economist at PNC Financial Services Group in Pittsburgh, 'and certainly is not nearly strong enough to overcome the drain on the government side.' Government figures released last week confirmed that the American economy slowed in the spring, and the latest jobs numbers suggested that the weakness continued into the early summer. With economists and politicians fervently arguing over whether the economy is poised for liftoff or stalled on the runway, Friday's jobs report did little to end the debate. Some economists are talking about the risk of a 'double dip' recession, and the political stakes for the Obama administration are rising as the midterm elections tick closer. In remarks made while visiting Gelberg Signs, a small business in Washington, President Barack Obama acknowledged the uneven pace of the economic revival. 'The road to recovery doesn't follow a straight line,' he said. 'Some sectors bounce back faster than others. So what we need to do is push forward. We can't go backwards.' Investors greeted Friday's lackluster report by buying Treasuries, a haven in uncertain times, and driving the yield on the two-year note to a record low. Investors appear to expect the Federal Reserve to keep interest rates low, perhaps for years, as unemployment remains stubbornly high. Stocks sold off in the morning, but rallied a bit in the afternoon, with the Standard & Poor's 500-stock index down about 0.4 percent for the day. Many economists were surprised by the scale of layoffs by state and local governments, which cut 48,000 jobs in July. In the last three months, they have shed 102,000 jobs. The Senate voted earlier this week to approve a $26 billion package of aid to states and school districts, and the House is expected to vote on the measure on Tuesday. Economists pointed out that even if the bill passed, it would only stem additional layoffs, not induce hiring. Government jobs are usually viewed as more stable than those in business, but severe budget shortfalls have hobbled state and local agencies. 'It just seems really drastic to me,' said Michael Hidalgo, 33, who was let go at the end of July from the San Jose Fire Department. 'Even though I knew there was a possibility, I didn't know that all the cuts would go through.' Although the nation's unemployment rate did not worsen, that was in part because people continued to leave the labor force, which means they simply stopped looking for work during the month. The Labor Department greatly revised its headline number for June, widening the job loss figure for that month to 221,000 jobs, from 125,000. Private sector hiring in June, originally reported at 83,000, was lowered to 31,000. Friday's jobs report renewed pressure on lawmakers to consider the next steps they might take to bolster the economy. Along with the consideration of aid to states, a fierce discussion is still to come about whether to let the tax cuts enacted under President George W. Bush expire at the end of the year. Recent indicators focusing on consumer confidence, retail sales and housing appear to put the economy in a holding pattern. Earlier this week, a crucial index of manufacturing showed that growth had slipped slightly in July and chain stores reported anemic increases in sales. On the more positive side, auto sales increased 5.1 percent in July compared with a year earlier. With corporate earnings rising partly on the back of cost cutting, employers are reluctant to give up profits. 'So while corporate earnings were spectacular,' said Allen Sinai, chief global economist at Decision Economics, 'the job market just stinks.' July's labor report did admit a few shafts of light. The average number of hours worked in private sector jobs ticked up to 33.5 a week from 33.4 in June, suggesting that employers were squeezing more from employees. That usually presages hiring. And average hourly earnings by workers on private payrolls edged up slightly to $22.59 in July, reflecting a 1.8 percent increase for the previous 12 months. Manufacturing, which has been a relative bright spot in hiring the last few months, added 36,000 jobs in July. Automakers helped by keeping plants open that usually close during the month. The number of people out of work for 27 weeks or more dipped slightly to 6.6 million, from 6.8 million, while the median duration of unemployment eased to 22.2 weeks in July, from 25.5 weeks in June. The government's broadest definition of the unemployment rate, incorporating people who want jobs but did not search during the month, was unchanged at 16.5 percent. Some economists say a slow recovery is inevitable, given the damage done by the financial crisis. Consumers, who account for about two-thirds of economic activity, have been reluctant to spend while still paying off debts racked up during the boom. Consumer credit shrank in June, the government reported on Friday, as it has for nearly two years. 'We forget that when you go from trying to move a rock with a lever and trying to move it with your bare hands, you might eventually be able to move it with your bare hands, but you're going to move it a lot more slowly and a shorter distance,' said Jerry Webman, chief economist at Oppenheimer Funds. 'That's the position we are in the American economy: Our lever broke.' Even optimists were discouraged by Friday's report. 'No question about it, the three-month average of adding 50,000 jobs is disappointing versus almost anybody's expectations,' said Robert J. Barbera, chief economist of Mount Lucas Management, who has said that the economy is on track for sustained recovery. 'And certainly it's less than half of what you need to keep things stable.' A prominent pessimist, Jan Hatzius, chief U.S. economist for Goldman Sachs, lowered his forecast of economic growth for 2011 to 1.9 percent, from 2.5 percent. 'This economy is absolutely appalling,' said Mary Moore, 39, who has been applying for jobs as an administrative assistant in Norfolk, Va., since she lost her job at a publishing company in May 2009. Moore, who can collect unemployment benefits for a few more months, is struggling to pay her $525-a-month rent and health care insurance, which recently nearly tripled to $379 a month. 'As an American I did not believe we would see times such as this,' she said. 