U.S. Payrolls Rise Less Than Forecast Ahead of ShutdownShobhana Chandra
Employers in the U.S. added fewer workers to payrolls than projected in September, indicating the world’s largest economy had little momentum heading into the 16-day federal government shutdown.
The 148,000 increase followed a revised 193,000 gain in August that was larger than initially estimated, Labor Department figures showed today in Washington. The unemployment rate fell to 7.2 percent, the lowest level since November 2008.
Stocks and Treasuries climbed as the report supported expectations that the Federal Reserve won’t hurry to reduce monthly bond purchases aimed at spurring growth and employment. Progress in the labor market depends on how quickly the economy can bounce back from the loss of business and confidence caused by the budget battles in Washington.
“It’s not like we’re falling off a cliff, but there’s a failure to get any spark in employment,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York, who correctly predicted the drop in the jobless rate. “Had this report come in strong, there was some possibility of the Fed tapering in December, but that possibility seems to be very small now,” and a move is more likely next year, he said.
The Standard & Poor’s 500 Index rose 0.6 percent to 1,754.67 at the close in New York. The yield on the 10-year Treasury note fell to 2.51 percent from 2.60 percent late yesterday.
The median forecast of 93 economists surveyed by Bloomberg called for a 180,000 advance in payrolls. The unemployment rate, derived from a separate Labor Department survey of households rather than employers, was forecast to hold at 7.3 percent, according to the survey median.
Employment climbed at temporary-help agencies, wholesalers, transportation and warehousing businesses and retailers. State and local government hiring also picked up. Federal government employment declined by 6,000 to 2.72 million, the lowest since 1966.
Josh Lefebvre, 21, started as a legal assistant in Alexandria, Virginia, on Oct. 7, having graduated from Binghamton University in New York in May. He had applied for “maybe 10 or 15” jobs and used a staffing agency before finding his new position.
“I consider myself luckier than other people who are my age, in that I found a job fairly quickly,” he said. “It’s been tough on a lot of people who didn’t take on internships beforehand, because it’s very competitive.”
Others aren’t as fortunate. Jacob Parker of Norfolk, Virginia, said he lost his job supervising subcontractors for a homebuilding company about a month ago because his boss decided to “restructure and hire cheaper guys.”
Now, the 21-year-old father said he’s thinking of moving to North Dakota, where the energy boom has helped push the unemployment rate down to 3 percent as of August, the lowest in the nation.
“I don’t really have a trade, and I was making a decent amount of money,” he said. “I’ve been looking at everything to change gears and provide a secure future for my son.”
The September payrolls figure reflects the pay period that includes the 12th of the month, two weeks prior to the partial federal shutdown.
“There probably was some slowdown in hiring in anticipation of the shutdown,” said Nariman Behravesh, chief economist for IHS Inc. in Lexington, Massachusetts, who forecast a 155,000 gain in payrolls. “It is going to affect the October numbers too, which will be quite weak. The problem is, we don’t know what the underlying strength of the labor market is, and we won’t know for some time.”
Private employment, which excludes government agencies, rose 126,000 after a revised gain of 161,000. Company payrolls were projected to rise by 180,000, the Bloomberg survey showed.
The participation rate, which measures the share of the working-age population in the labor force, stayed at 63.2 percent, matching the lowest since August 1978.
Employment at factories increased by 2,000 following a 13,000 gain in the previous month. Construction companies added 20,000 workers, the most since February, and retailers took on almost 21,000 employees.
A separate report from the Commerce Department today showed construction spending rose in August for a fifth consecutive month, propelled by the strongest outlays on homebuilding in five years.
Expenditures were up 0.6 percent to a $915.1 billion annual rate following a revised 1.4 percent increase in July that was larger than previously estimated.
Faster hiring that leads to bigger gains in wages would help to accelerate consumer spending, which accounts for about 70 percent of the economy. Even as the debate on fiscal policy heated up last month, retailers began announcing plans to add workers for the holiday shopping season.
Wal-Mart Stores Inc., the world’s largest retailer, is hiring 55,000 seasonal employees, a 10 percent rise from last year. Target Corp. said it plans to take on about 70,000 workers. Kohl’s Corp. will add about 53,000 workers for the holiday season, about the same as last year.
Through September, the U.S. had recovered 7 million of the 8.7 million jobs lost as a result of the 18-month recession that ended in June 2009.
President Barack Obama last week signed legislation that funds the government through mid-January and suspends the nation’s $16.7 trillion debt limit, for now ending the threat of default, which economists had warned could tip the U.S. back into a recession.
Average hourly earnings climbed by 0.1 percent to $24.09 in September from the prior month, and increased 2.1 percent over the past 12 months. The average work week for all workers held at 34.5 hours in September.
Today’s report, delayed by the government shutdown that ended Oct. 17, was originally slated for Oct. 4. The report didn’t include any late responses from employers, indicating the figures will be subject to revision as is typical each month.
Employment figures for October will be pushed back to Nov. 8 from the originally scheduled Nov. 1, according to the Labor Department.
Fed policy makers, scheduled to gather Oct. 29-30, are trying to gauge the strength of the U.S. expansion without federal economic data that was suspended after the government closing.
The central bankers will pare the monthly pace of asset buying to $70 billion from $85 billion at their March 18-19 meeting, according to the median of 40 responses in a Bloomberg survey last week.
“Conditions in the job market today are still far from what all of us would like to see,” Chairman Ben S. Bernanke said at a news conference following the Fed’s September meeting.
While the labor market has shown improvement, the political debate over the shutdown and the debt limit may have been a source of concern for employers.
San Francisco based URS Corp., a provider of engineering and construction services, furloughed about 3,000 employees, saying the total includes employees idled by the closing of a government facility where they work as well as those directed by U.S. officials to halt operations or cut staffing.
Among other companies paring their workforce, San Francisco-based Wells Fargo & Co., the biggest U.S. mortgage lender, last week said it eliminated an additional 925 jobs in its home-loan unit and has cut more than 5,700 since midyear.