Job Losses in U.S. Exceed Forecasts After Local Governments Fire Teachers

The U.S. lost more jobs than forecast in September as local governments fired educators and other workers to make up for declining tax revenue.

Payrolls fell by 95,000 workers after a revised 57,000 decrease in August, the Labor Department said yesterday in Washington. Companies added 64,000 jobs, less than forecast, while the unemployment rate held at 9.6 percent.

A lack of jobs is hampering consumer spending, the biggest part of the economy, limiting growth heading into 2011. The dollar weakened and the Dow Jones Industrial Average closed above 11,000 as the report bolstered speculation the Federal Reserve will embark on a renewed round of large-scale asset purchases to spur the recovery.

“This is really just the first step in a long line of layoffs in the public sector,” said Lindsey Piegza, an economist at FTN Financial in New York. “The momentum in the private sector is very minimal. There are all of these uncertainties hanging over the private sector right now.”

The dollar decreased 0.3 percent to 82.18 yen at 4:05 p.m. in New York yesterday. The Dow climbed 0.5 percent to close at 11,006.48, the highest since May 3.

The unemployment rate was forecast to rise to 9.7 percent, according to the median forecast in a Bloomberg News survey of 83 economists. Total payrolls were projected to fall by 5,000, while private payrolls were forecast to rise by 75,000. Revisions show that companies hired 93,000 in August and 117,000 in July, indicating a slower pace of job growth.

Government Jobs

Government payrolls decreased by 159,000 last month. State and local governments reduced employment by 83,000, while the federal agencies lost 76,000 jobs as census workers were fired, the Labor Department said yesterday.

State and local governments from New Jersey to California are firing workers to balance their budgets as declining property values and slowing economic growth squeeze tax revenue.

Public schools in New Jersey were set to start the academic year down 10,000 jobs, including 7,000 educators who chose to retire, Steve Wollmer, a spokesman for the New Jersey Education Association, a union that represents teachers, said in August after Governor Chris Christie slashed $1.3 billion in aid to schools and local governments.

Yesterday’s jobs report is the last before the Nov. 2 congressional elections that threaten to deprive the Democrats of their majorities in the House and Senate, partly as a result of voter disenchantment with Congress and President Barack Obama’s handling of the economy.

Sinking Approval

Obama’s job approval over a three-day period that ended Oct. 6 was 46 percent, compared with 53 percent at the same time last year, according to a poll from Princeton, New Jersey-based Gallup Inc.

“We need to continue to explore ways that we can help states and local governments maintain workers who provide vital services,” Obama said yesterday in Bladensburg, Maryland. “At the same time, we have to keep doing everything we can to accelerate this recovery.”

Obama on Aug. 10 signed into law legislation providing $26 billion in aid to state governments. The bill was designed to prevent thousands of layoffs of teachers and other public service employees.

The jobless rate has equaled or exceeded 9.5 percent for 14 consecutive months, surpassing the 13-month period from mid 1982 to mid 1983 as the longest span of elevated joblessness since monthly records began in 1948.

Unemployment Forecast

The unemployment rate is forecast to average 9.2 percent next year, according to the median forecast in a Bloomberg survey of economists last month.

“Further action is likely to be warranted unless the economic outlook evolves in a way that makes me more confident that we will see better outcomes for both employment and inflation before too long,” New York Fed President William Dudley said in an Oct. 1 speech, a day after Fed Chairman Ben S. Bernanke said in a statement that the central bank has a duty to aid the economy. The Federal Open Market Committee next meets Nov. 2-3.

The economy grew at a 1.7 percent annual pace in the second quarter after expanding at a 3.7 percent rate in the first three months of the year and 5 percent at the end of 2009.

The buying power of consumers isn’t improving, yesterday’s report showed. Average hourly earnings were little changed at $19.10, and the average work week for all workers held at 34.2 hours.

Census Workers

The decrease in overall payrolls reflected a 77,000 decline of temporary workers hired by the government to conduct the decennial population count and a 49,800 drop in teaching jobs at the local government level.

The unwinding of census employment has distorted the payroll figures for months as the government dismissed workers as the count winds down. Only about 6,000 census workers remain on the payrolls, indicating September may be the last month the jobs data will be distorted.

Manufacturing payrolls decreased by 6,000 after declining 28,000 a month earlier. Economists projected a 2,000 increase for September. Employment at service-providers decreased 73,000. Construction companies subtracted 21,000 workers and retailers hired 5,700 workers.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 17.1 percent from 16.7 percent.

The Labor Department also published its preliminary estimate for the annual benchmark revisions to payrolls that will be issued in February. The revision may mean the worst recession since the 1930s resulted in the loss of 8.73 million jobs, up from the 8.36 million currently on the books.

Government Revisions

Regular monthly revisions showed bigger decreases in payrolls than previously estimated for July and August. The adjustments reflected bigger losses in government, while private payrolls were pushed up. Companies hired 93,000 workers in August and 117,000 in July, compared with previously estimated gains of 54,000 for each month.

While some companies are still firing employees, others are recalling workers. American Airlines, the third largest U.S. airline and a unit of AMR Corp., plans to recall 545 flight attendants and 250 pilots to meet demand for international flights as it begins it begins an alliance with British Airways Plc and Spain’s Iberia.

To contact the reporter on this story: Timothy R. Homan in Washington at thoman1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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