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Pace of U.S. job growth slows

Employers add 148,000 to payrolls in September as unemployment rate ticks down to 7.2%. Weak data may prolong Fed stimulus effort.

October 22, 2013|By Don Lee
  • The unemployment rate last month dropped a notch, to a five-year low of 7.2%, but that was partly the result of workers leaving the labor market. Above, Melinda Walker, left, and Tomas Kringel listen to Angelina Tennis, who is recruiting workers at First Command Financial Services during a career fair in Miami.
The unemployment rate last month dropped a notch, to a five-year low of 7.2%,… (Joe Raedle, Getty Images )

WASHINGTON — The job market weakened in September amid a slowdown in key growth engines such as healthcare and leisure — a worrisome sign given that the employment picture probably worsened this month with the partial federal government shutdown.

Employers last month added a modest 148,000 net new jobs, the Labor Department said Tuesday. That was down from an upwardly revised job growth of 193,000 in August, and well below analysts' forecasts for about 180,000 new jobs in September.

The unemployment rate last month dropped a notch, to a five-year low of 7.2%, but that was partly the result of workers leaving the labor market.

The disappointing report, delayed 2½ weeks by the government shutdown that ended last Thursday, nonetheless was met with approval on Wall Street. Stocks rose moderately as investors and analysts alike agreed that the lackluster report would give the Federal Reserve more reason to delay a cutback in its massive bond-buying stimulus, possibly until as late as next March.

"It puts the kibosh on any Fed tapering in 2013," said Mark Vitner, a senior economist at Wells Fargo.

But for Main Street, there wasn't much to cheer in the latest report. Vitner said the job tally for September was inflated by a one-time burst of hiring of bus drivers and teachers in the transportation sector and among state and local governments.

Overall, he said, "the report showed the economy had less momentum going into the government shutdown" than people believed — or had hoped for.

With the September data and small revisions to the payroll numbers for July and August, the economy added on average 143,000 jobs a month in the third quarter.

That pace is more than enough to keep up with population growth and new job entrants, but too slow to absorb at a satisfactory rate many of the 11.3 million officially unemployed or to help the nearly 8 million part-time workers who want more hours.

Job growth averaged 207,000 a month in the first quarter and 182,000 in the second quarter this year. Analysts had predicted a return to stronger job growth in September, based partly on low jobless claims and other surveys suggesting a pick-up in activity.

But the weaker growth reflects an economy that is expanding at a sluggish rate, weighed down by federal spending cuts under the so-called sequester, weak global demand and lingering constraints in borrowing and spending from the Great Recession — not to mention uncertainty over the federal budget.

"The trend is in the wrong direction," Robert B. Reich, public policy professor at UC Berkeley, said of job growth.

Like most experts, Reich expects the employment data for October, set for release Nov. 8, to look even worse than last month's because that report will incorporate some of the effects of the 16-day government shutdown.

A White House analysis, released Tuesday after the jobs report was issued, estimated that roughly 120,000 fewer jobs were created than expected in the first 12 days of October. Along with hurting job creation, early data indicate that economic output, sales growth and consumer spending were all down in the first part of October, according to the analysis by the Council of Economic Advisers.

"What we did in October was a self-inflicted wound," said Jason Furman, chairman of the council. Furman said the final tally could change — "and could potentially get worse."

Apart from the shutdown and its possible effect on hiring, the latest report showed that manufacturing was flat and the once-booming leisure sector lost 13,000 jobs over the month. About 7,000 of those jobs came at restaurants, which had averaged growth of about 25,000 a month this year.

The healthcare industry added just 6,800 jobs in September, about one-third of its monthly average this year. Despite the expectation that the healthcare law will increase the number of people insured — and thus the potential patient pool — experts said they don't see a huge resurgence of payroll growth, especially at hospitals, which are facing reduced reimbursements.

"You need people to staff the beds for sure, but the wild card here is what I think is a cultural shift in the way hospitals operate and an extreme, aggressive surge for cost-cutting," said Paul Hughes-Cromwick, a senior health economist at Altarum Institute in Ann Arbor, Mich. "They are radically taking cost out of production."

Earlier signs of slow economic growth and an uncertain employment outlook had prompted the Fed at its September meeting to delay a pullback of its $85-billion-a-month bond buying. The purchases are aimed at lowering long-term interest rates and stimulating investment and spending.

Fed policymakers have questioned the benefits of continuing the stimulus, but most have been hesitant to make any changes until the job market is on firmer footing. Some Fed officials have said they would like to see the economy producing job growth of about 200,000 a month.

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