U.S. Expansion Struggles to Become Broad-Based as Job Growth Lags Behind
The U.S. economy is struggling to achieve a broad-based expansion as companies remain reluctant to ramp up hiring 18 months after the end of the recession.
The unemployment rate rose to seven-month high of 9.8 percent in November as payroll growth slowed to 39,000 from 172,000, a Labor Department report showed yesterday. Hours worked and earnings stalled, while a record 6.4 million women in the labor force were without work last month.
The worse-than-projected job numbers followed a recent series of statistics indicating the economy was picking up steam. Sales at retailers rose by the most in eight months in November while manufacturing kept expanding, data this week showed.
“We haven’t hit escape velocity,” said Mark Zandi, chief economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “We’re approaching it, but the coast is not clear.” He defined “escape velocity” as consistent economic growth of 3 percent or more and monthly increases in payrolls of at least 175,000.
Economists surveyed by Bloomberg News projected a 150,000 increase in November employment, according to the median of 87 economists. The jobless rate, which rose from 9.6 percent, was forecast to hold steady.
The hesitant recovery means Federal Reserve Chairman Ben S. Bernanke and his central bank colleagues may press ahead with their plans to buy $600 billion of longer-term Treasury securities by the middle of next year.
‘Validates the Fed’
The jobs report “validates the Fed doing what they are doing,” Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York, said yesterday.
It also puts pressure on lawmakers to extend tax cuts, put in place by former President George W. Bush, beyond their expiration at the end of this year and to renew aid to the long- term jobless.
“It’s critically important that we extend tax cuts to the middle class, the Bush tax cuts and the Obama tax cuts, and that we not pull the rug out from under the unemployed that are searching for work, and we extend the unemployment benefits,” Austan Goolsbee, chairman of President Barack Obama’s Council of Economic Advisers, said in an interview with Bloomberg Television.
The two-year Treasury note rose yesterday, pushing the yield down to 0.47 percent from 0.54 percent late on Dec. 2. Stocks ended higher, extending the biggest weekly gain in a month, propelled by a rally in shares of energy and metal producers as commodity prices rose. The Standard & Poor’s 500 Index advanced 0.3 percent to 1,224.71 at the 4 p.m. close in New York.
Not as Weak
The jobs market is not as weak as the November numbers suggest, said Nariman Behravesh, chief economist at IHS in Lexington, Massachusetts.
“I’m willing to bet a fair amount of money that this number is going to be revised up,” he said, pointing to recent declines in claims for unemployment benefits. He put underlying job growth at about 100,000, roughly the pace of the last two months.
The Institute for Supply Management also said yesterday that its non-manufacturing index, which covers about 90 percent of the economy, rose to a six-month high of 55 in November from 54.3. A reading higher than 50 signals growth.
Private payrolls that exclude government agencies rose 50,000 in November after increasing 160,000 in October, the Labor Department’s report showed. Employment at service- providers, which includes governments, increased 54,000.
State and local governments reduced employment by 13,000, as did manufacturers. The decline at factories was the biggest in three months.
New York City, facing a $3.3 billion deficit in next year’s budget, will cut its workforce by more than 10,000 over the next year-and-a-half, Mayor Michael Bloomberg’s budget office said Nov. 18. More than 6,200 workers will be fired, and the remainder of the cuts will be made through attrition, his office said.
The mayor is founder and majority owner of Bloomberg News parent Bloomberg LP.
The number of temporary workers rose 39,500 in December, indicating companies are holding off hiring full-time employees.
“Our clients still are looking for flexibility because there’s enough uncertainty in the pace of the recovery,” Tig Gilliam, chief executive officer of Adecco North America, said yesterday in an interview. The Melville, New York, firm is a division of Glattbrugg, Switzerland-based Adecco SA, the world’s largest supplier of temporary 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 -- held at 17 percent.
“The labor market is capping off a very poor recovery this year,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia. “I don’t think we’ll slide back into job losses, but being stuck in neutral isn’t good. While consumer spending has normalized, employers are uncertain about demand going into 2011.”
The report also showed the number of people unemployed for 27 weeks or more increased as a percentage of all jobless, to 41.9 percent, the highest since August.
“It is really ugly right now,” said Anthony Johnson, 27, of Atlanta, who has been looking for a job since leaving the Marine Corps, where he was a warehouse clerk, 14 months ago. “It is so competitive. For every few jobs that come out, so many people are fighting for that one position.”
Johnson, who has a business degree, says he has put in more than 100 applications this year and had one interview for a job that was later filled internally. Some employers say he’s overqualified, he said.
In an effort to reach out to some of the nation’s largest employers, Obama met with Wal-Mart Stores Inc. Chief Executive Officer Mike Duke at the White House on Nov. 29. The meeting is one of a series of sessions aimed at soliciting the views of companies, with the goal of spurring the recovery and adding jobs.
The U.S. Senate is scheduled to vote today on Democratic proposals to extend a portion of the Bush-era tax cuts before they expire at the end of the month, Senate Majority Leader Harry Reid said.
Republicans have vowed to block any measure that doesn’t extend all of the Bush-era tax policies, saying that expiration of the lower rates for upper-income taxpayers would hurt job creation.
“Raising taxes during times of economic uncertainty and instability is the wrong thing to do,” Senator Orrin Hatch, a Republican from Utah, said in a statement.
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