Global News
Could have been worse.
That was the reaction on Friday to the government report that the nation’s employers added just 80,000 jobs in October. While the pace was not exactly robust, it was better than over this summer, when monthly hiring fell to 20,000. Upward revisions in the report for September and August gains contributed to the sense that the economic picture was a little less bleak.
“The underlying momentum of the economy is better now than we thought it was a few months ago,” said Augustine Faucher, the director of macroeconomics at Moody’s Analytics. “We’re doing O.K., even if we’re not doing great. The odds of a double-dip recession are lower, at least.”
But even without a second recession, frustration over the sluggish recovery could impede President Obama’s re-election chances.
The administration is still haunted by its overly optimistic predictions, made in January 2009, of what the economy would look like once Congress passed a $787 billion stimulus package. White House economics advisers predicted that the stimulus would bring unemployment down to 6 percent by the end of this year and close to 5 percent by the end of 2012. Instead, unemployment dipped slightly to 9 percent in October from 9.1 percent, about where it has been all year long. The Federal Reserve is projecting about 8.6 percent for next year.
While the Congressional Budget Office and other nonpartisan organizations have said, again and again, that the recession and recovery would have been even worse without government intervention, Republican presidential contenders argue that today’s weak economy proves that fiscal stimulus cannot create jobs.
The Obama administration has taken the opposite tack, arguing that the economy needs more, not less, government assistance.
“What I take from this report is that the economy is moving in the right direction, but it’s not moving there fast enough, and this is why the administration proposed the American Jobs Act,” said Alan B. Krueger, chairman of the Council of Economic Advisers.
The job gains in October were just barely enough to keep up with population growth, so they did not substantially reduce the backlog of 14 million unemployed workers. As a result, the unemployment rate is still about double what it was in the year before the recession began, 4.6 percent.
“It will take years for the U.S. job market to return to its prerecession glory,” said Jason Schenker, president of Prestige Economics.
Economists and politicians typically view the monthly jobs number as a crucial indicator of the nation’s economic health. But with so many potential game changers on the horizon in Europe and at home, the latest report may say little about what Americans should expect.
The fate of Greece has been up in the air for about a year and a half, and this week the political wrangling has been particularly tumultuous in Athens. If the European bailout deal falls through for Greece, the effects could spread to other heavily indebted countries like Italy and perhaps set off another global financial crisis.
“The outlook ahead remains for modest growth, but risks remain to the downside without a convincing resolution of the euro zone crisis, which is conspicuously absent at present,” said Nigel Gault, chief United States economist for IHS Global Insight.
Mitigating these worries, however, is the case of MF Global, an American financial services company that filed for bankruptcy this week after making bad investments in European markets. The bankruptcy of the relatively small firm was taken in stride.
“We had a primary dealer file for bankruptcy this week without seeing any of the waves from 2008 related to Bear Stearns and Lehman Brothers,” said John Ryding, the chief economist at RDQ Economics, referring to two bigger financial firms whose collapses helped send global financial markets into a tailspin.
Another potential wild card is Congress’s panel on deficit reductions, the so-called supercommittee. Talks have stalled, and the committee has less than three weeks before an alternative (and more draconian) plan might kick in.
If government spending cuts are put into effect too quickly, they could be a severe drag on the economy and even derail the fragile recovery, economists have said. Governments at various levels have been steadily paring back, and have laid off, on net, 323,000 workers in the last year.
There are other domestic policy unknowns, too. Congress has not yet decided whether to renew a 2 percent payroll tax cut and federal extensions of unemployment benefits — both set to expire in January. Many economists support the measures.
Even if shocks like these do not materialize, the economic outlook is still troubling.
Among the biggest challenges is the army of millions of Americans who have been out of work for months or even years.
The average time an unemployed worker has been pounding the pavement is unusually high, at 39.4 weeks, just shy of the all-time high of 40.5 weeks recorded in September. People who have been out of work for longer spells have significantly more trouble getting rehired, for complicated reasons, including stigma and the deterioration of skills.
“In interviews, they say they’re concerned that my base of skills has been antiquated because of this employment gap,” said Sarah Hoppe, 43, a former account manager in Toledo, Ohio, who was laid off in July 2009.
“I tell them I have a good mind and an infinite capacity to learn,” she said, but employers still pass her over. “It’s absolutely demoralizing.”
In addition to the upward revisions to previous job growth numbers, there were a few other positive signs in the latest jobs report.
Employment in temporary help services rose slightly. Employers often use temp workers before taking the plunge and hiring permanent staff.
Hourly earnings also rose 5 cents, after a gain of 6 cents in September.
The length of the average workweek, however, remained flat at 34.3 hours, where it has been for about a year. Companies usually work their existing employees harder before hiring additional workers, so the stagnant workweek is not a particularly good sign for job growth.
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By: Catherine Rampell
Source: The International Herald Tribune, Nov. 4, 2011
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