By SUDEEP REDDY
Lack of Hiring in August Roils Financial Markets; Economic Gloom Ratchets Up Pressure on Obama
The U.S. economy slammed into a wall in August, failing to add any jobs for the first time in nearly a year and ratcheting up pressure on President Barack Obama to find a way to kick-start the sputtering recovery.
Underscoring the political problem posed by the dearth of hiring, Mr. Obama on Friday asked the Environmental Protection Agency to withdraw an air-quality proposal that Republicans and business groups said could kill thousands of jobs and cost hundreds of billions of dollars a year.
The nation's unemployment rate was unchanged in August. In addition, virtually zero jobs were added to the economy. Jon Hilsenrath and Phil Izzo provide analysis with News Hub panelists Kelly Evans and David Reilly. Photo: AFP PHOTO / ROBYN BECK
The dismal jobs report, along with news of Europe's stalled efforts to assist debt-stricken Greece, rocked financial markets. The Dow Jones Industrial Average dropped 253.31, or 2.2%, to 11240.26, despite talk that the labor-market woes may spur the Federal Reserve to step in with more monetary support. Investors piled into safe-haven investments, sending gold up 2.6%. The yield on the 10-year Treasury, which falls as prices rise, briefly fell below 2% for just the second time in more than 50 years.
In the Labor Department's snapshot of the August jobs landscape, cuts in the public sector entirely offset the private sector's gain of 17,000 positions. Figures from earlier months were lowered, due largely to deeper cuts by government. The unemployment rate remained at 9.1% but is likely to move higher in coming months amid the lackluster pace of job creation.
Nearly every aspect of the labor picture weakened. Average hours worked—a proxy for economic output because it reflects both the number of people on the job and the hours they put in—clicked down in August. Average hourly pay also declined.
The housing market, like the jobs picture, remains weak and is still a drag on recovery. More evidence of the housing bubble's fallout emerged Friday, when the federal regulator for mortgage giants Fannie Mae and Freddie Mac sued 17 financial institutions over mortgage-bond investments losses that contributed to the collapse of the mortgage giants nearly three years ago.
Housing and unemployment remain the paramount concerns, and will be a focus of a speech by Mr. Obama Thursday.
The big question hanging over the economy is whether August's poor showing is a one-time event or a pivot toward slower growth or even a new recession.
The economy does have some bright spots: Weekly filings for jobless claims remain relatively steady rather than signaling a pickup in layoffs.
And while economic activity has slowed, consumers increased their spending before the August turmoil. Businesses, though wary, haven't panicked and triggered a downward spiral of retrenching.
In the past three months, the private sector added an average of 83,000 jobs. That pace, while far too low to signal meaningful improvement in the economy, suggests slow growth ahead. August's private-sector job tally was depressed by a strike at Verizon Communications Inc., which temporarily idled about 45,000 people during the Labor Department's survey period. That could lead to a rebound in the next report.
Job seekers wait to enter a job fair in South Los Angeles on Wednesday.
But employers show little inclination to ramp up hiring soon. Egge Machine Company Inc., a specialty auto-parts maker, has two openings—in accounting and on the manufacturing line—but isn't in a hurry to fill the jobs because business has been slow. "At this particular point, we can go indefinitely without [filling the two posts] ... until things pick up," said Ernie Silvers, chief executive of the Santa Fe Springs, Calif., company.
The weak employment report raises the likelihood of action by the Federal Reserve at its Sept. 20-21 meeting. Fed officials, who downgraded their forecasts for growth and unemployment in recent months, plan to discuss their options to support the economy, including another round of bond buying or altering the mix of securities on the central bank's balance sheet to hold down longer-term rates.
The focus now is on Mr. Obama's jobs speech next week. "Obama needs to hit a home run next week," said Brendan Daly, a Democratic strategist and former aide to House Democratic Leader Nancy Pelosi when she was Speaker.
For weeks, Republican leaders in the House and Senate have been criticizing Mr. Obama's proposals, but they are aware of the public's frustration with both parties' seeming inability to work together to revive the economy.
House Majority Leader Eric Cantor (R., Va.) issued a notably conciliatory statement after Friday's jobs report was released. He said Republicans could support, for example, at least parts of Mr. Obama's plans for infrastructure spending, especially a proposal to give states more control over these projects. And he cited the president's support of a Georgia program, popular with Republicans, that allows companies to audition workers for eight weeks while they receive unemployment checks.
Mr. Obama's proposal will be a mix of tax breaks and spending on infrastructure, aides say. His speech may mention some government-private sector proposals that don't require Congressional approval, but a senior administration official said Mr. Obama's plan will be a set of specific initiatives that he wants Congress to act on. It's unlikely that any large-scale jobs program will pass Congress because of divisions between the parties. Many Democrats say additional spending is the only way out of the economic rut, while Republicans advocate tax cuts and deregulation.
In the August jobs report, several keysectors—including manufacturing, construction and retail—posted declines. The health-care sector maintained its steady growth and employment rose in the professional-services sector, including temporary workers.
The U.S. Economy added zero jobs in August as the unemployment remained unchanged at 9.1%. Kelly Evans joins Rolfe Winkler to discuss.
The unemployment rate was unchanged but a broader measure of joblessness that accounts for people who stopped searching for work ticked up to 16.2%. The number of people employed part-time because they couldn't find full-time work, or their hours were cut back, shot up to 8.8 million from 8.4 million. Both figures suggest greater difficulty finding or keeping work as businesses grow more cautious.
Andrea DeRouen rejoined the ranks of the unemployed last month and noticed that the number of postings on job boards has dropped. In November 2009, the Rogers, Ark., resident lost her job as a sales analyst for a company that sells vacuum cleaner accessories. Ms. DeRouen, 48 years old, has had two four-month contract positions since then, but hasn't been able to find a permanent position despite applying for about 100 jobs. "It's an employer's bounty," Ms. DeRouen said. "And even if they say they're in a hurry, they're not in a hurry."
Ms. DeRouen lives in a rented house with her nine-year-old son and husband, who works from home maintaining websites. She said the family is a month behind on rent now that jobless benefits amount to only about one-third of her former salary. She also has avoided taking insulin shots for her diabetes because the medication is too expensive and her family is "rapidly running out of money."
"It's demoralizing," she said, "but there's just no choice."
—Carol E. Lee and Naftali Bendavid contributed to this article.
Via: http://online.wsj.com/article/SB10001424053111904583204576546220157206548.html
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