After some positive U.S. data yesterday, the news today was less-than-cheery as U.S. employers cut jobs for a sixth consecutive month in July, said the department of Labor. The news suggests the recovery is still in doubt.

U.S. non-farm payrolls dropped by 44,000 in July — below expectations — bringing the total of jobs lost since the start of the year to 486,000.

Paradoxically, the U.S. unemployment rate declined for the first time since January. The jobless rate dropped by two-tenths of a percentage point to 6.2%. This accords with the recent drop in initial jobless claims, but may indicate many Americans are giving up on finding work, inspiring worries about the impact of job losses on consumer spending and economic recovery.

Also, June’s numbers were revised sharply downwards to -72,000 from an initial estimate of -30,000. Manufacturing was the weakest area. Also, hours worked slipped 0.4%.

“This smacks of cost cutting rather than a free fall in production, however, BMO Nesbitt Burns Inc. chief economist Sherry Cooper said in a report. “We look for strong productivity and profit gains to result.”

The decline in the jobless rate came as people gave up looking for work and exited the labour force. “The labour force fell more than half a million and the participation rate plunged. No doubt there are measurement problems in this area,” says Cooper.

CIBC World Markets said that unless that hiring drought ends soon, “the growth push from recent tax cuts and mortgage refinancing will prove no more lasting that the one following the 2001 stimulus package.”

RBC Financial Group economist Ivana Rupcic said the jobs numbers were key “because a meaningful, durable economic recovery cannot occur until businesses resume hiring. Advance indicators are already pointing to a strong third quarter, but July’s job losses suggest the fourth quarter is still open for debate.”

In other data, personal incomes in U.S. rose 0.3% in June, following an identical increase in May. Wage and salary income also increased by 0.3%, and reflects the largest gain in this component since February of this year, says Rupcic. “Today’s numbers reinforce the view of stronger growth in the second quarter, as witnessed in yesterday’s second-quarter GDP numbers, and credit a large portion of this growth to the ever-resilient U.S. consumer.”

Cooper said that after yesterday’s strong real GDP report for Q2, observers are more confident of a second-half economic acceleration. “As always, employment will come along slowly with a lag as the economy changes to a higher gear,” she said.

CIBC said it was “frankly surprised” that after what looks to have been a huge productivity gain in Q2, the economy was still able to stretch July’s output further while still laying people off. “At some point soon, with GDP growth firming in Q3, there will be at least moderate net hiring. But until we see really good payrolls figures (i.e. well above 150K gains per month), any economic acceleration is at risk of petering as consumers retrench from debt- and tax-cut financed spending gains,” CIBC said.