Job Growth Dead in the Water
More bad news on the economic front: job growth seems dead in the fetid economic water in the worst jobs report in many months:
Employment growth ground to a halt in August, as sagging consumer confidence discouraged already skittish U.S. businesses from hiring, keeping pressure on the Federal Reserve to provide more monetary stimulus to aid the struggling economy.
Nonfarm payrolls were unchanged last month, the Labor Department said Friday. It was the first time since 1945 that the government has reported a net monthly job change of zero. The August payrolls report was the worst since September 2010, while nonfarm employment for June and July was revised to show 58,000 fewer jobs.
“The bottom line is this is bad,” Diane Swonk, chief economist with financial services firm Mesirow Financial, told CNBC Friday.
Despite the lack of employment growth, the jobless rate held steady at 9.1 percent in August. The unemployment rate is derived from a separate survey of households, which showed an increase in employment and a tick up in the labor force participation rate.
While the jobs report underscored the frail state of the economy, the hiring slowdown probably will not be seen as a recession signal as layoffs are not rising that much.
Washington Post Columnist E.J. Dionne, Jr (whose column is run on TMV) writes on the Post-Partisan blog:
If anyone doubted that we need a much more aggressive effort to create jobs — and if anyone doubted that our eight-month-long obsession with debt reduction was a giant distraction — today’s jobs numbers should clear away any misapprehensions..
…The Obama administration’s original stimulus plan wasn’t big enough, but it did create and save millions of jobs, and one reason was the assistance it gave to state and local governments to prevent layoffs. That assistance is running out, and if there is one big “job-killer” out there, to use the Republicans’ favorite phase, it is all those government cutbacks in states and counties, cities and towns around the nation.
We don’t know for certain how much debate there still is inside the administration about how big the president’s jobs proposal will be. But those who want to make it bigger are right, and these numbers should bolster their position.
This isn’t just a matter of politics and the next election. For the sake of the country and the jobless, President Obama really needs to change the debate and make clear that it’s not just liberals who think the economy needs a boost right now. The ranks of those who believe in more stimulus include business people, investors and economists of many political stripes. Now more than ever, Obama needs to think and act big.
The bottom line problem in the economic and political worlds (in both parties) is this:
There is a feeling — putting aside any talk radio left and right polemics — that Barack Obama may simply be someone who is too small a leader to propose, push and battle for the policies that may be necessary to get the United States out of the economic ditch he inherited and some say possibly enlarged.
The U.S. labour market is at least as weak as it was four years ago, just before the world’s largest economy shed jobs for 25 consecutive months.
Shockingly, the U.S. payrolls were unchanged in August, according to a preliminary reading released Friday by the Labour Department.
This redefines the economic narrative. The Wall Street consensus was for an increase of 65,000 jobs. That number is weak, but indicative of the notion that the U.S. economy is muddling along. Stagnant jobs growth is something weaker than muddling.
The White House — as it always does — will caution investors and voters to resist making too much of one month’s data. Fair enough. In August, employment in the information industry lost 48,000 positions, reflecting a strike at Verizon Communications Inc. that has since ended.
But that does little to mask the trend. Hiring in July and August was revised lower. The U.S. economy has now failed to create enough positions to keep up with natural changes in the size of the labor force for four consecutive months.
The overall unemployment rate held steady at 9.1 percent as many of the long-term unemployed gave up looking for work and dropped from the rolls, but the trend for the economy looks increasingly negative.
Remember, the economy needs to add some 150,000 jobs per month to keep pace with population growth. To reduce the unemployment rate to the below 8 percent promised by the Obama administration in selling the 2009 stimulus package in time for Election Day, the economy would need to add more than 275,000 jobs a month. Zero jobs means losing lots of ground.
Economists had projected that the economy would add something less than 100,000 jobs, which would have allowed the president to maintain his campaign posture of saying that the economy was growing, but not fast enough.
With that argument wiped out and his own budget office forecasting on Thursday that unemployment would remain at dire levels well into next year, the president finds his long-promised jobs pitch groaning under impossible expectations.
Hiring may also have been held back by the turmoil over the debt-ceiling fight and its effect on Wall Street and public confidence. Even accounting for the Verizon strike, many economists were expecting job growth of around 70,000 for August.
But the report showed little or no job growth across the board, with the exception of healthcare services. Government continued to cut back, and manufacturing payrolls were down slightly. Making matters worse, the government revised down job growth in July from 117,000 to 85,000, and said employers added just 20,000 jobs in June, not 46,000.
In all, the economy has added an average of just 35,000 jobs in the last three months –- a figure so small that most analysts would consider it a rounding error. In addition, the government said the August report showed private employers trimmed the work hours of employees a notch, to 34.2 hours. The average weekly earnings for all private workers also dropped, down 3 cents to $23.09.