Drop in Openings Signals Limited U.S. Job Growth: Economy
Job openings in the U.S. dropped for a second straight month in August, indicating companies are reluctant to beef up payrolls through year-end without faster economic growth.
The number of positions waiting to be filled fell by 32,000 to 3.561 million from a revised 3.593 million the prior month that was less than previously estimated, the Labor Department said today in a statement. Hiring increased at the same time firings rose to a three-month high.
Companies such as Foot Locker Inc. are facing a weakening global economy and the possibility of automatic tax increases and government cutbacks, helping explain limited payroll growth. At the same time, a jobless rate that fell below 8 percent last month for the first time in more than three years shows some progress in the labor market.
“A lot of firms may be back on their heels, reluctant to go out and expand,” said Scott Brown, chief economist at Raymond James & Associates Inc. in St. Petersburg, Florida. “There is uncertainty due to the election, the fiscal cliff and Europe. We are definitely still adding jobs. The key question is how much more restraint we’re going to see from businesses.”
Today’s report helps illuminate the dynamics behind the government’s monthly employment figures. Payrolls rose by 114,000 workers, the fewest in three months. While job openings eased in August, they were still 409,000 higher than the same month last year.
In September, the jobless rate fell to 7.8 percent from 8.1 percent the prior month, the Labor Department said Oct. 5.
Stocks fell, extending losses for the Standard & Poor’s 500 Index to a fourth day, on concern corporate earnings and global growth will slow. The S&P 500 declined 0.6 percent to 1,433.03 at 2:37 p.m. in New York.
The International Monetary Fund said European banks may need to sell as much as $4.5 trillion in assets through 2013 if policy makers fall short of pledges to stem the fiscal crisis, up 18 percent from its April estimate. The IMF yesterday cut its forecasts for global growth.
Job openings in the U.S. increased for workers in construction, professional and business services and retail trade. Manufacturing, accommodation and food services, and education and health services showed declines.
James McCoy, a 43-year-old from Waretown, New Jersey, is searching for work. Having lost his job last month at a Wawa Inc. convenience store where he worked for more than 16 years, McCoy said he has been looking for opportunities online, attending job fairs and going to restaurants and retailers asking about work.
“It’s been tough,” said McCoy. “I’ve put in plenty of applications and gotten plenty of rejections,” he said.
Total firings, which exclude retirements and those who left their job voluntarily, increased to a three-month high of 1.848 million from 1.582 million a month before.
Santa Clara, California-based Applied Materials Inc. (AMAT), the largest producer of chipmaking equipment, said last week it plans to eliminate 900 to 1,300 jobs, or 6 percent to 9 percent of its worldwide workforce. Camden, New Jersey-based Campbell Soup Co. (CPB), the world’s largest soup maker, said Sept. 27 it plans to close two plants that employ more than 700 in the U.S. as demand declines and productivity improves.
“We have an election coming up and a so-called fiscal cliff the country is approaching,” Kenneth Hicks, chief executive officer of New York-based Foot Locker, the largest U.S. athletic shoe-chain, said in an Aug. 17 call with analysts. “So, there’s always the potential of an impact on the U.S. economy that we will have to manage through.”
The fiscal cliff refers to more than $600 billion of federal tax increases and spending cuts that will take effect automatically next year without any action by lawmakers.
While last month’s drop in unemployment was unexpected -- no economist surveyed by Bloomberg projected the rate would fall below 8 percent -- Federal Reserve policy makers have said they would like to see “sustained improvement” in the labor market.
The Fed said today that the economy was expanding “modestly” last month, supported by improvements in housing and auto sales, even as the labor market showed little change.
While “employment conditions were little changed since the last report,” several districts reported shortages of highly skilled workers, the Beige Book said.
Today’s Labor Department report showed that 2.14 million people quit their jobs in August, down from 2.163 million in the prior month. In total, the rate of separations climbed to 3.3 percent from 3.1 percent.
The number of people hired in August rose to 4.39 million, pushing up the hiring rate to 3.3 percent from 3.2 percent, according to today’s report.
In the 12 months ended in August, the economy created a net 1.8 million jobs, representing 51.6 million hires and about 49.8 million separations, today’s report showed.
Taking into account the 12.54 million Americans who were unemployed in August, today’s figures indicate there are about 3.5 people vying for every opening.
The central bank in September said that it would probably hold its target interest rate near zero until at least mid-2015 to stimulate more hiring. The central bank also began a third round of stimulus, buying $40 billion in mortgage bonds a month.
“We’re looking for ongoing, sustained improvement in the labor market,” Fed Chairman Ben S. Bernanke told reporters following the announcement on Sept. 13. “What we’ve seen in the last six months isn’t it.”
Federal Reserve Bank of Chicago President Charles Evans has called for accommodation as long as unemployment exceeds 7 percent and the inflation outlook remains below 3 percent. On Sept. 20, Federal Reserve Bank of Minneapolis President Narayana Kocherlakota said the central bank should hold rates near zero until joblessness drops below 5.5 percent and inflation doesn’t exceed 2.25 percent.
Even some of those who have found work recently are wary of opening up their pocketbooks because of a lack of confidence in the economy. Jenna Kozel, 27, just took a job at Lookout Inc., a San Francisco-based smartphone security company, working in marketing and digital media, after being recruited by technology companies from her public relations job. She’s earning more than $100,000 a year, yet doesn’t plan to buy a car or a house anytime soon.
“I always thought, once I got to a certain income bracket, I’d buy one, but I just don’t want to because I’m worried,” she said. “Even though I’m financially stable, that just seems like an expense I don’t need. I just want to keep my expenditures as low as possible.”
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