In the United States, the jobless recovery that most economists figured had ended last winter is back -- with a sting in its tail that is raising new worries about the economic outlook and adding new zip to the presidential election race.

Through most of 2003 and early 2004, the economy sizzled, but job creation fizzled. Then a spurt of big job gains from March through May suggested that the worst was over. The new expansion seemed to be settling in for a longer run, as more people with jobs and income would keep the growth machine rolling even without the stimulus of tax cuts and low interest rates.

But the confident cheers died this month on news that the economy created a mere 32,000 jobs in July, not the expected 230,000, and the June total was 61,000 jobs shy of what had previously been reported.

Suddenly, President George W. Bush's talk about a strengthening economy began to sound a bit hollow, while John Kerry, who is challenging him for his job, revived his earlier attack on companies that "export jobs" rather than products.

For economists, the issues are a bit more complex.

Since the U.S. recession ended in November, 2001, the U.S. economy has grown by almost 9 per cent, a pace that historically would have created as many as eight million new jobs.

Instead, total employment last month was up by a scant 400,000 from the low point, a sliver-thin gain of 0.3 per cent.

"It's very much the issue of the day," said Avery Shenfeld, senior economist at CIBC World Markets Inc.

Very much the puzzle of the day as well, according to Bill Cheney, chief economist at MFC Global Investment Management, a unit of Manulife Financial Corp. "It's something we all talk about and think about, but no one really has the answer."

Comparisons with the past are daunting. Between 1950 and 1990, the five U.S. recoveries from recession that got this far (two ran out of gas early) produced jobs gains averaging almost 9 per cent. At first, the rebound from the early 1990s recession earned its "jobless recovery" moniker because it generated an increase of only 3.1 per cent, but that was 10 times the bounce in the job market this time.

One explanation for the difference is obvious. U.S. companies have squeezed massive productivity gains out of their operations, enabling them to get far more production out of their existing complement of workers.

Behind those gains are a variety of factors -- new technology, more pressure from world competition, rising labour costs and shaky business confidence.

"The most fundamental factor is that businesses have figured out how to use technology more effectively to reduce their need for workers," said Mark Zandi, chief economist at Economy.com Ltd.

In addition, labour costs have been rising relative to the cost of capital. Health and pension costs "have risen dramatically and will continue to rise, so business opts to invest in machinery, not people, especially full-timers."

Mr. Cheney said the "speed of technological change and the intensity of competition are the things business people talk about now." Until the 1980s, both were less important, so "when a recession was over, you went back to the way things were," which included rehiring the people laid off.

On top of all that, normally upbeat business people are feeling more fragile than usual.

The data say the latest recession was very mild, Mr. Cheney said, but "business executives say it's the most brutal experience they've ever been through." With that trauma has come "an uncharacteristic level of caution about hiring."

Mr. Zandi said stock market meltdowns, corporate scandals and geopolitical risk from Iraq and terrorism have "inordinately depressed" business confidence.

To some extent, the slow hiring record is a result of simple arithmetic. Deep recessions set the stage for big snapbacks, but since the 2001 slump was "barely a recession, you wouldn't expect as big an uphill," Mr. Shenfeld said.

Bank of Montreal chief economist Tim O'Neill goes further. Like stock prices and capital spending, the job market overheated in 2000 and it is taking a long time to work off all three imbalances. "I don't want to overstate this, but to some extent, the perception of softness is a bit of an illusion."

The consensus is that the pace of job creation will pick up again, but questions remain about whether those new jobs can support a lot of new consumer spending.

Although companies face a rising bill for worker compensation, they are trying to hold down the growth of take-home wages to finance the rapid growth in health and pension benefits. In the past year, hourly pay has increased by less than the rate of inflation, so the real purchasing power of U.S. workers has actually fallen.

With tax cuts coming to an end and many consumers heavily in debt, however, Americans will need more income from work. "We're still shy of the labour income needed to support consumer spending," Mr. Shenfeld said.