Hiring Uptick Not Enough To Ease Recession Fears

"Been down so long it looks like up to me. "

Wall Street borrowed a line from Mississippi bluesman Edward "Furry" Lewis' 1928 classic Friday after news that the dismal U.S. job market wasn't quite so dismal last month. But five years into the worst downturn since the Great Depression of Lewis' era, the latest economic data offer little solace to the 14 million Americans who can't find work.

Stocks rallied on the employment news, and investors certainly had reason to be relieved. Nonfarm payrolls rose 103,000 for the month — a better showing than the gain of 60,000 jobs that had been expected. The jobs count for September included the return of 45,000 Verizon Communications workers, who had dropped off payrolls in August due to a strike. Without those workers, payrolls increased by just 58,000.

The unemployment rate remained steady at an uncomfortably high 9.1 percent.

"These numbers are good; we'll take them," said Mark Zandi, chief economist with Moody's Analytics. "But they're relative to very low expectations, and they're certainly not good enough. If we don't see better job growth, the unemployment rate will notch higher and the economy will throttle back. So this is not sustainable."

There was a little more good news deeper in the data. Revisions to prior reports added a total of 99,000 jobs in July and August.

Hourly earnings rose four cents after falling four cents in August, and the number of hours worked per week edged up a fraction. That means the average paycheck didn't shrink last month. Incomes dropped in August for the first time since October 2009, curbing spending and pushing savings to the lowest level in over a year.

"It's a breath of fresh air and should allow the (market's) recovery we've had this week to continue," said Brian Dolan, chief strategist at Forex.com. "It's still just one month's worth of data."

That report pointed to an economy that is growing, but not fast enough to put Americans back to work. The labor market needs to add roughly 150,000 jobs a month just to keep up with new workers entering the work force.

The bulk of the new hiring in September came from professional and business services, health care and construction. Government employment continued to fall as state and local governments slashed workers to make up for falling property and income taxes. Since the cuts began three years ago, some 535,000 state and local jobs have been eliminated.

Manufacturing companies, which have been one of the few sources of strength in an otherwise weak recovery, also shed 13,000 jobs last month, extending August's decline of 4,000. Other surveys seem to confirm that the nation's factories are slowing, which does not bode well for the rest of the year.

Employment growth overall has slowed sharply since the first half of the year, when the economy was adding roughly 130,000 jobs a month. Following a prolonged deadlock over the federal budget, a near default by the Treasury and the downgrade of the U.S. government's debt rating, consumers have slowed their spending, and businesses have cut back on hiring. The pace of monthly job growth has slowed to about 90,000 a month.

Now a political deadlock in Europe over a looming default by Greece has pushed the continent to the brink of recession. The failure to contain the crisis has imperiled the European banking system, which holds large portfolios of Greek debt. The contagion has begun spreading to other countries including Italy, Europe's third-largest economy, which saw the rating on its government debt downgraded earlier this week.

All of which threatens to pull the U.S. back into recession.

"The U.S. economy is just about hanging in there," said Paul Ashworth, a senior economist at Capital Economics. "But growth is very weak and susceptible to any adverse shock coming from the eurozone."

European governments are deeply divided over how to relieve Greece of its crushing debt burden. Richer countries like Germany and France have insisted that Athens adopt deep budget cuts and tax increases. But Greek officials insist that, after several rounds of "austerity" measures have plunged the country deep into recession, further cutbacks are unsustainable.

The turmoil in Europe may be a prelude to the looming budget debate in Washington that will come to a head in the next few months. A "supercommittee" appointed by Congress faces a deadline of late November to identify $1.2 trillion in federal budget cuts. The White House, seeking backing for a $400 billion stimulus package to boost hiring, is proposing tax increases to pay for it.

If the committee's recommendations fail to win approval from the full Congress and White House, a series of "automatic" budget cuts would kick in, forcing a sharp cutback in spending. Since government spending accounts for roughly 20 percent of U.S. gross domestic product, those cuts could wipe out what little GDP growth remains.

Until the outlook clears, corporate hiring managers and small business owners will likely remain reluctant to take on new workers.

"The longer uncertainty persists, the greater the risk of a vicious cycle of weaker hiring, weaker income, and weaker demand that ultimately ends in recession," said Goldman Sachs economist Andrew Tilton.

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  • by Big Red Location: Greenville on Oct 8, 2011 at 09:43 AM
    Hiring uptick? YOU HAVE GOT TO BE KIDDING ME! Of course, over 40,000 of those "jobs" were the result of the Verizon workers going off strike and going back to work,which was counted in that figure the government gave us. Every silver lining this administration gives us ends up being a grease pencil.
  • by Barlow Location: Winterville on Oct 8, 2011 at 05:14 AM
    Jobs bills out there to pass Repugs...Repugs?..Hello, Repugs?...Anybody there?...Wanta pass one of your own jobs bills?...Hello?
    • reply
      by Anonymous on Oct 8, 2011 at 06:08 AM in reply to Barlow
      For the good of the American people President Obama would be intelligent to compromise with Republicans instead of stubbornly keeping his all or nothing attitude.
      • reply
        by Barlow on Oct 8, 2011 at 10:15 AM in reply to
        The Repugnants don't even know how to compromise. So far they have compromised on what? They won't even bring the jobs bill up for a vote in the House. They could care less about the American people. They only care about the White House in 2012.
    • reply
      by Anonymous on Oct 8, 2011 at 06:32 AM in reply to Barlow
      There is no "jobs bill" presented by Obama Lavon. If you would take off your blinders you would see that it is just another stimulous package to add to the debt and create temoporary jobs. Obama is done in 2012, accept it!!
      • reply
        by uh on Oct 8, 2011 at 08:43 AM in reply to Anonymous
        Have you read the bill? The elements that are stimulus are all tax reductions. Are you against tax reductions now?
        • reply
          by To Uh on Oct 8, 2011 at 11:12 AM in reply to uh
          What planet are you on? It sure isn't earth!!
        • reply
          by uh on Oct 9, 2011 at 07:51 PM in reply to uh
          So that insult leads me to believe that no, you have not read the bill.
  • by obama forever on Oct 8, 2011 at 05:09 AM
    You miss me yet!?
  • by Anonymous on Oct 8, 2011 at 02:24 AM
    Big spending and borrowing since the Democrats to majority of Congress from 2006 to 2010, and since Barrack Obama became President has been a disaster. In 2012, vote Republican for hope and change.

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