September Sees Slowdown In Job Growth
Numbers Underscore Weakness, Fragility of Economic Recovery
Washington — On the long road to recovery, the finish line seems to keep moving.
The economy was supposed to be getting up to speed by now. But middling job creation in September, followed by a confidence-rattling round of political brinksmanship in October have derailed hopes of a robust recovery this year.
New government data released Tuesday showed business hiring slowed significantly last month. The Labor Department reported the economy added 148,000 jobs, well below analysts’ expectations and down from nearly 200,000 jobs added in August. The unemployment rate dipped to 7.2 percent.
The data were collected before the federal government shutdown and fight over the debt ceiling this month, and economists believe that the picture has only gotten gloomier since then. And the bright spot of the recovery — a rebound in the housing market — appears to be losing steam due to a jump in mortgage rates.
All of this could cast a pall over the all-important holiday shopping season, when retailers ring up the bulk of their sales, analysts say.
“A lot of employers really sat on their hands in October in terms of hiring decisions, sort of like the deer caught in the headlights,” said Scott Anderson, chief economist at Bank of the West. “I’m afraid that this lackluster job growth could hang on until early next year.”
Even before the government shutdown, the job market seemed to be sputtering. The data released Tuesday showed typically strong fields such as financial services and leisure and hospitality actually shed jobs in September, while the gains in professional services were more muted last month.
The construction industry added 20,000 workers in September, one of the biggest jumps of any sector. But the increase comes after six months of almost no change, despite expectations that it would get a boost from the improving housing market.
In fact, sales of existing homes slowed down in September, according to the National Association of Realtors. The trade group warned that higher mortgage rates are hurting affordability. Interest rates on a conventional 30-year mortgage have risen by a whole percentage point since April, according to Freddie Mac.
The government shutdown exacerbated those problems, economists said. The White House estimated Tuesday that the closure shaved a quarter of a percentage point from the annualized rate of growth during the fourth quarter and cost 120,000 jobs through mid-October.
Although furloughed workers will receive back pay and lawmakers avoided a potentially catastrophic default on the nation’s debt, minimizing the direct economic damage, the blow to Americans’ psyche could be much harder to repair.
“Part of growing is having the confidence and belief that you should grow,” said Frank Friedman, chief financial officer at Deloitte. “You see the light at some point. I think people are just concerned that they don’t.”
Consumer confidence nose-dived amid the gridlock in Washington, and economists worried that dampened spending and discouraged businesses from hiring. Looming ahead are the new deadlines that lawmakers set early next year for negotiating a budget and the nation’s borrowing limit.
“There is no question that the focus of policy should be on how to achieve a faster pace of job growth by increasing certainty and investing in jobs, rather than the self-inflicted wounds of the past several weeks that increased uncertainty and inhibited job growth,” said Jason Furman, head of the White House’s Council of Economic Advisers.
The weak employment report also likely puts the brakes on any efforts to scale back the Federal Reserve’s massive stimulus program this month, economists say. The central bank has been pumping $85 billion a month into the economy in hopes of boosting the recovery. And it has promised to continue the program until the job market strengthens.
Fed officials are slated to meet in Washington next week to discuss the future of its stimulus. A growing number of economists now expect the Fed will not scale back the program until at least December, or even after the fiscal debates are resolved next year.
“Absent some miraculous improvement in the data, tapering in 2013 now looks to be off the table,” JPMorgan chief U.S. economist Michael Feroli said.
Many investors had expected the Fed to begin pulling back its stimulus last month, so the prospect of an open pipeline from the central bank helped boost stock markets on Tuesday. Both the blue-chip Dow Jones industrial average and the broader Standard & Poor’s 500-stock index closed up half a percentage point.
The extent of the fallout from the fiscal crisis will depend in large part on whether consumers and businesses can shake off their malaise. Gallup’s latest reading of consumer confidence showed an uptick last week for the first time since mid-September, when Washington’s fiscal showdown began.
National retailers also enjoyed an increase in sales last week, according to the International Council of Shopping Centers, a trade group. Michael Niemira, the group’s chief economist, said the 1.4 percent increase came after three weeks of stagnant results.
“As the federal government shutdown came to an end, consumers were seemingly back in a mood to shop,” he said.