Stalling economy creates no jobs
S&P downgrade, strike, debt talks among factors
Hiring ground to a halt last month as the political stalemate in Washington, debt crises in Europe, and unsettled financial markets around the world took their toll on confidence and the US economy.
Employment growth was weak for the fourth consecutive month, with net new jobs in August adding up to a round number: zero. The unemployment rate remained at 9.1 percent, while earnings fell and revisions to data in previous two months showed 58,000 fewer jobs had been created than estimated.
“We’ve slowed to stall speed,’’ said Nariman Behravesh, chief economist at the financial research firm IHS Inc. “It’s clear that people just aren’t hiring now.’’
This complete lack of employment growth - a stark backdrop to President Obama’s planned speech next week on job-creating measures - again revived fears that the US economy could slip into a second, or double dip, recession, and stocks plunged yesterday. The Dow Jones industrial average lost more than 250 points, or more than 2 percent, to close at 11,240. The broader Standard & Poor’s 500 Index and technology heavy Nasdaq Composite each lost more than 2.5 percent of value.
Economists cited a number of August events that may have contributed to the dismal report, including a strike against telecommunications giant Verizon Inc. that temporarily kept about 45,000 workers off payrolls. The strikers have returned to work.
More broadly, analysts said, the downgrade of US credit by the rating agency Standard & Poor’s, the congressional standoff over the US debt ceiling that almost pushed the nation into default, the threat of another financial crisis in Europe, and a series of steep sell-offs have rattled businesses and consumers.
Consumer confidence fell last month to its lowest level since April 2009, near the end of the recession, according to the Conference Board, a nonprofit research group in New York. The US economy grew at a rate of less than 1 percent in the first half of the year, the slowest pace of growth since the recession ended.
“The number one reason for the dismal employment numbers is the lack of demand for products and services,’’ said John Silvia, chief economist at Wells Fargo Securities LLC Economics Group. “You hire somebody to do something, not just to sit around. And businesses just aren’t seeing enough demand to add people.’’
Few economists expect the nation to fall back into a technical recession, but most forecast a long period of painfully slow growth that will feel like a recession to millions of Americans. Brian Bethune, an economics professor at Amherst College, said yesterday’s job report makes it more likely that the Federal Reserve will take new action to stimulate the economy when policy makers meet Sept. 20-21. The Fed last month said it would hold its benchmark short-term interest rate near zero into 2013.
“They are looking at a menu of possible actions,’’ Bethune said. “It’s now likely they will do something.’’
In Washington, the Obama administration called unemployment “unacceptably high,’’ laying the groundwork for the president’s planned call for additional federal spending and tax cuts to boost the economy.
Obama is scheduled to lay out his economic plan Thursday night before a joint session of Congress. In a statement, House Speaker John Boehner blamed White House policies for the economy’s struggles. “Private-sector job growth continues to be undermined by the triple threat of higher taxes, more failed ‘stimulus’ spending, and excessive federal regulations,’’ Boehner said.
The private sector added just 17,000 jobs, in August, the fewest since February 2010. But those small gains were offset by the loss of 17,000 jobs in government.
Hiring fell across many sectors. Manufacturers cut 3,000 jobs, the sector’s first decline since October 2010. Construction companies, retailers, and transportation firms also cut workers.
But sectors important to Massachusetts posted the strongest national job gains. Professional and business services, which include a variety of technology, research, and consulting firms, added 28,000 jobs last month. Health care added about 30,000 jobs.
Massachusetts has been recovering faster than the nation as a whole, and adding jobs at about twice the US rate. In the first seven months of the year, employment in Massachusetts grew by nearly 2 percent, compared to less than 1 percent nationally. The state’s unemployment rate was 7.6 percent in July, compared to 9.1 percent nationally.
“Look at the sectors that are adding jobs,’’ said Silvia, the Wells Fargo economist. “Education, health care, technology, professional services - that’s Boston.’’
The state will report August employment numbers in about two weeks.
Alan Clayton-Matthews, a professor at Northeastern’s School of Public Policy and Urban Affairs, cautioned that the state will not be able to avoid the economic bad weather entirely.
“Massachusetts is better off than the rest of the country because of our economic mix. But the rest of the country, and the rest of the world, are our customers. And if those economies are slowing, we’ve got to expect that our economy will slow as well.’’
D.C. Denison can be reached at firstname.lastname@example.org.