Job Growth Stagnates in U.S. in August as Unemployment Rate Holds at 9.1%
Job growth in the U.S. unexpectedly stagnated in August, adding to pressure on Federal Reserve Chairman Ben S. Bernanke and President Barack Obama to rouse an economy that’s at risk of stalling two years after the last recession ended.
Payrolls were unchanged, the weakest reading since September 2010, the Labor Department said yesterday in Washington. The median forecast in a Bloomberg News survey called for a gain of 68,000. The jobless rate held at 9.1 percent.
The Standard & Poor’s 500 Index fell 2.5 percent to close at 1,173.97 in New York yesterday. Ten-year Treasury yields sank to 1.99 percent at 4:34 p.m. in New York from 2.13 percent late on Sept. 1. The dollar extended its longest rally since January.
“We’re calling for a mild recession at this point,” said Julia Coronado, chief economist for North America at BNP Paribas in New York. “We’ll see QE3 definitely,” she said, referring to a third round of large-scale asset purchases by the Fed. “It helps put a floor under the economy and stabilize things.”
The report raised the political stakes for Obama as he prepares to address a joint session of Congress next week. An unemployment rate stuck above 9 percent has helped push Obama’s disapproval rating to an all-time high, according to a Quinnipiac University Aug. 16-27 poll of 2,730 registered voters. Some 52 percent disapprove of Obama’s job performance, up from 46 percent in July.
Still, Obama’s options will be limited by opposition to increased spending from Republicans in Congress.
“Even if the president announces a bold job creation plan next Thursday, the chances of it getting through Congress are not very large,” Christina Romer, a professor of economics at the University of California-Berkley and a former chief of Obama’s Council of Economic Advisors, said in an interview on Bloomberg Television.
Political infighting over the budget and mounting fear of a default in Europe caused the S&P 500 to plummet 17 percent from July 22 to Aug. 8, prompting companies and consumers to cut back. The lack of hiring is one reason Bernanke last week said the central bank still has tools available to stimulate growth.
Options for the Fed include extending the maturity of Treasury securities in its $1.65 trillion portfolio to push down long-term interest rates, purchasing more Treasuries, or expanding the range of securities it buys, Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., said in an interview yesterday on Bloomberg Television’s “In the Loop” with Betty Liu.
The economy expanded at a 1 percent pace in the second quarter following a 0.4 percent gain in the first three months of the year, the Commerce Department reported last month. Consumer spending grew 0.4 percent, the smallest increase since the last three months of 2009.
“The macroeconomic environment has remained difficult for consumers who continue to face high unemployment rates, high gasoline and high food costs,” Rick Dreiling, chairman and chief executive officer at Dollar General Corp., said on an Aug. 30 teleconference with analysts. The Goodlettsville, Tennessee- based company is the biggest dollar discount chain in the U.S.
Sustained payroll increases of around 150,000 a month are needed to bring unemployment down about half a percentage point over a year, according to Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.
Still, the jobs report could be “a one-off event tied to the financial-market turbulence in early August,” Rupkey said. He said it would take three months of job losses to signal a recession.
The payroll figures last month included a 48,000 drop in the information industry, mostly reflecting a strike at Verizon Communications Inc. (VZ) Conversely, the end of a partial shutdown of the Minnesota government returned about 23,000 workers to their jobs in August.
Even with the rebound in Minnesota, government payrolls decreased by 17,000 in August. Employment at state governments rose by 5,000. Local government employment slumped 20,000.
Private hiring, which excludes government agencies, climbed 17,000 last month, the smallest increase since a decline in February 2010.
Fares Abderrahmane said he’s been looking for work for three months after losing his job as manager at a clothing warehouse in New York that paid $1,400 every two weeks. He has sent hundreds of online applications, mostly to clothing retailers.
“There’s no response, nothing,” said Abderrahmane, 36, who lives in Brooklyn. “It’s hard to find a job now. Everybody is looking.”
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