The unemployment rate ticked up to 8.3 percent in July, reflecting a stagnant economic picture as hiring improved but not by enough to make a dent in the sea of unemployed Americans.
The Labor Department report, in a glimmer of positive news after three straight months of dismal jobs numbers, showed that hiring reached its best level since February, with 163,000 jobs added.
But the number brings the economy back to treading-water status. The economy added an average of 151,000 jobs a month this year, roughly the same as last year's pace. That's not enough to satisfy the 12.8 million Americans who are unemployed. It would take 250,000 new jobs a month to rapidly bring the unemployment rate down.
With the rate rising from 8.2 percent to 8.3 percent, Republicans amped up their criticism of President Obama's stewardship Friday.
"Today's increase in the unemployment rate is a hammer blow to struggling middle-class families," Mitt Romney said in a statement.
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Speaking later in North Las Vegas, he called the sustained high unemployment an "extraordinary record of failure."
"That's the longest period of time, 42 months ... we've had unemployment above 8 percent in American history," Romney said.
Both sides are to using the report to double down on their respective tax plans. House Speaker John Boehner said "any new job creation is welcome news," but that unemployment above 8 percent makes it "insane to raise taxes on small businesses."
Republicans want to extend the Bush-era tax rates for all Americans; Obama and congressional Democrats largely want to extend them for those making less than $250,000, letting rates rise for top earners.
Obama, speaking just minutes after Romney, said Friday that raising taxes on the middle class is "the last thing that we should be doing."
He noted that the jobs report means the economy has created 4.5 million new jobs in the last 29 months, and 1.1 million this year.
"But let's acknowledge we've still got too many folks out there who are looking for work," Obama said.
House Democratic Leader Nancy Pelosi touted the fact that July marked the 29th straight month of private sector job growth.
"Last month, 163,000 jobs were created despite Republicans' refusal to work with President Obama and Democrats to create jobs, grow our economy, and ensure the economic security of our middle class," she said. "With too many Americans still out of work, the message remains clear: we must do more."
The government uses two surveys to measure employment. A survey of businesses showed job gains. The unemployment rate comes from a survey of households, which showed fewer people had jobs. Economists say the business survey is more reliable.
Investors appeared pleased with the report. Futures tracking the Standard & Poor's 500 index and the Dow Jones industrial average gained about 1 percent. The stock market is coming off four days of losses. Yields on government bonds also rose after the report came out as investors moved money out of low-risk assets.
A better outlook on hiring could prompt the Federal Reserve to hold off taking more action to spur growth. The U.S. central bank, 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.
The job gains were broad-based. Manufacturing added 25,000 jobs, the most since March. Restaurants and bars added 29,000. 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. Over the past year, wages have increased 1.7 percent -- matching the rate of inflation.
Despite July's job gains, 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.
Manufacturing activity shrank for the second straight month in July, a private survey said Wednesday. Consumer confidence improved slightly last month but remains weak.
Rising pessimism about the future is taking a toll on businesses and consumers, many economists say. Europe's financial crisis has weakened that region's economy, hurting U.S. exports. 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.
Americans are responding by spending less and saving more. A big reason growth slowed in the second quarter was that consumer spending, which accounts for roughly 70 percent of economic activity, slowed to an annual growth rate of 1.5 percent. That was down from 2.4 percent in the first quarter.
The Associated Press contributed to this report.