By Ylan Q. Mui
Businesses began to slow hiring in September, even before the fiscal crisis in Washington sapped Americans’ confidence in the economy, according to data released Tuesday morning.
The long-awaited monthly employment report from the Labor Department shows the economy added 148,000 jobs in September, well below analysts’ expectations and down from nearly 200,000 jobs the previous month. The unemployment rate dipped to 7.2 percent.
The report was delayed by the federal government shutdown this month, and the data does not reflect its impact — but the results next month are not likely to be better. Consumer confidence nose-dived during the closure, and economists worried that dampened spending and discouraged businesses from hiring.
“What I’m hearing anecdotally is a lot of employers really sat on their hands in October in terms of hiring decisions, sort of like the deer caught in the headlights,” said Scott Anderson, chief economist at Bank of the West. “I’m afraid that this lackluster job growth could hang on until early next year.”
Much of the hiring in September was concentrated in construction, which had enjoyed a renaissance thanks to the stronger housing market. But the job gains have not been as robust as many economist expected. September’s gain of 20,000 construction jobs followed almost six months of little change.
Meanwhile, the financial and leisure and hospitality industries shed jobs while growth in professional services abated. The federal government shed 6,000 jobs, but state governments hired 22,000 workers, almost entirely in education.
“The labor market recovery continues, but the pace of job growth remains disappointing,” said Gus Faucher, senior economist at PNC Financial Services Group.
The damage wrought by the government shutdown and debate over the national debt ceiling could have been much more extreme, economists say. The temporary fiscal deal struck by lawmakers averted the worst-case scenarios by paying federal workers for the time they were furloughed and raising the government’s debt limit.
Other recently released data offers some evidence that the recovery has not been derailed. National retailers enjoyed an uptick in sales last week, according to the International Council of Shopping Centers, a trade group. The 1.4 percent increase followed three weeks of stagnant results.
“As the federal government shutdown came to an end, consumers were seemingly back in a mood to shop,” said Michael Niemira, ICSC vice president of research and chief economist.
The September jobs report seems unlikely to spark a change in direction from policymakers at the Federal Reserve when they meet in Washington next week. The Fed has pledged to keep pumping $85 billion a month in to the economy until the recovery strengthens. Many analysts believe it will leave the program intact during its meeting as it assesses any fallout from the fiscal crisis. Chicago Fed President Charles Evans said Monday that process could take months.
“I think we need a couple of good labor reports and evidence of increasing growth, GDP growth,” he said in a CNBC interview. “It is probably going to take a few months to sort that one out.”
The Fed had suggested that it would start pulling back its stimulus program this year, ending it altogether when the unemployment rate hit 7 percent. But officials recently downgraded their forecasts for growth this year, and much of the decline in the jobless rate has been due to people leaving the workforce, rather than getting hired. The Fed has since backed off that timeline.
