April 20, 2021

Job Growth at Halt in U.S.; Worst Showing in 11 Months

The dismal showing, the first time in 11 months that total payrolls did not rise, was the latest indication that the jobs recovery that began in 2010 lacked momentum. The unemployment rate for August did not budge, remaining at 9.1 percent.

As President Obama prepared to deliver a major proposal to bolster job creation next week, the report added to the pressure on the administration, on Republicans who have resisted any new stimulus spending, and on the Federal Reserve, which has been divided over the wisdom of using its limited arsenal of tools to get the economy moving again.

The White House immediately seized on the report as evidence that bold action was needed, calling the unemployment rate “unacceptably high.” Secretary of Labor Hilda L. Solis said in an interview that she hoped the president’s proposals would be embraced by Congress. “If they’re not supported, then he’s going to take it out to the public,” she said.

Republicans, in turn, argued that the numbers were further proof that the policies of Mr. Obama, whom they quickly dubbed “President Zero,” were not working. The lack of growth in nonfarm payrolls was well below the consensus forecast by economists of a 60,000 increase, which itself was none too optimistic. It was a sharp decline from July, which the Labor Department on Friday revised to show a gain of 85,000 jobs.

August’s stall came after a prolonged increase in economic anxiety this summer that began with the brinksmanship in Washington’s debt-ceiling debate, followed by the country’s loss of its AAA credit rating, stock market whiplash and renewed concerns about Europe’s sovereign debt.

On Friday, Wall Street stocks indexes promptly lost more than 2 percent of their value at the opening of trading, with the Dow Jones industrial average down about 200 points by midday, and some economists upgraded their odds for a double-dip recession.

The total employment figure, a monthly statistical snapshot by the Department of Labor, appears slightly more negative because 45,000 Verizon workers were on strike when the survey was taken and their jobs were not included. They will reappear in next month’s total. But even factoring in the Verizon jobs, private sector growth was the slowest it has been since May of last year. In addition, the report showed that job growth in June and July was softer than previously thought.

“As long as payrolls are weak, you will continue to hear cries of not just recession risk, but cries that the United States is in a recession and we just don’t know it,” said Ellen Zentner, the senior United States economist for Nomura Securities.

Economists blamed both sluggish demand for goods and services and the heightened uncertainty over the economy’s direction for the slow pace of job creation, saying political deadlock was creating economic paralysis.

“There is really a darkening cloud that seems to hover over the U.S. economy because of the lack of progress being made on economic issues,” said Bernard Baumohl, the chief economist at the Economic Outlook Group. “There is extreme frustration with Congress and the administration not working together to address the fiscal issues.”

Government continued to shed jobs over all, though small gains were posted at the state level, the Labor Department reported. Local governments, on the other hand, lost 20,000 jobs.

Two of the bright spots in the economy over the last year, manufacturing and retail, lost steam, falling by 3,000 and 8,000 jobs, respectively, in August. The health care sector added 29,700 jobs.

The number of long-term unemployed — people out of work for 27 weeks or more — remained about the same as in July, at 6 million , as did the median duration of unemployment, at 19.6 weeks compared with 19.7 weeks in July.

The general unemployment rate, which counts only people who looked for work in the previous four weeks, held steady at 9.1 percent. But a broader measure that includes people who have looked for work in the last year and people who were involuntarily working part-time instead of full-time, fell slightly to 16.1 percent. The percentage of working-age adults who were employed, already at its lowest rate since 1983, ticked down to 58.5 percent from 58.6 percent.

Though unexpectedly low, the jobs report may not change the mainstream view among economists that the economy will stay in growth mode, albeit at a level that is barely perceptible, much less comforting, to Americans without jobs.

“We’ve got at least another 12 months of difficulty to go through,” said Steven Ricchiuto, United States economist for Mizuho Securities USA. “I know that doesn’t help politicians who are worried about the elections.”

It is unclear whether the report increases the chances that Congress will act on any of the recommendations President Obama may make next week, such as a tax incentive for companies to hire new workers. But several economists said that given the fragility of the recovery, the payroll tax cut and extended unemployment benefits, both set to expire at the end of the year, should be renewed.

“It’s probably not the time for adding to fiscal drag,” said Jim O’Sullivan, the chief economist for MF Global. He said that together the tax cut and unemployment benefits account for 1 percent of the gross domestic product.

Some analysts had already downgraded their forecast for the jobs numbers on Thursday based on new economic indicators including weaker online job advertising, a rise in announced layoffs and a growing pessimism about the job market by consumers. A major report on manufacturing showed slowing employment growth and shrinking production and new orders.

But other indicators suggested that fears of recession have outstripped reality. Consumer confidence dropped sharply and pending home sales dipped, but in July retail sales increased and orders for durable goods — expensive items often purchased on credit — were up 4 percent. A report on chain-store sales indicated modest back-to-school shopping, somewhat slowed by Hurricane Irene.

Article source: http://www.nytimes.com/2011/09/03/business/economy/united-states-showed-no-job-growth-in-august.html?partner=rss&emc=rss

Bernanke Blames Politics for Financial Upheaval

In remarks that went well beyond his previous calls for Congress and the White House to address the nation’s long-term fiscal challenges, Mr. Bernanke suggested the process itself was broken.

“The country would be well served by a better process for making fiscal decisions,” he said.

Mr. Bernanke said he was “optimistic” about the long-run prospects for the American economy, and he gave little indication the Fed was mulling any increase in its economic aid programs, although he said the issue would be revisited in September.

But Mr. Bernanke, the nation’s most prominent economist, warned that the government had emerged as perhaps the greatest threat to renewed growth.

“The quality of economic policy-making in the United States will heavily influence the nation’s long-term prospects,” Mr. Bernanke said in the much-anticipated speech at a policy conference held each August at a resort in Grand Teton National Park.

The turn toward stronger language was welcomed by some observers of partisan battles in Washington that have pitted Republicans demanding spending cuts to reduce the federal debt against Democrats arguing for cuts and increased revenue.

A deal reached earlier this month to raise the maximum amount the government can borrow, in exchange for spending cuts of at least $2.1 trillion, would not reduce the debt to a level most economists regard as sustainable, and the chaotic political brinksmanship led Standard Poor’s to remove long-term Treasury securities from its list of risk-free investments.

Maya MacGuineas, president of the non-partisan Committee for a Responsible Federal Budget, described Mr. Bernanke’s remarks as “an emergency intervention.”

“It was great to hear him weigh in so strongly,” said Ms. MacGuineas. “He’s saying what needs to be said, and hopefully people will listen because of the messenger.”

Mr. Bernanke’s speech comes on the heels of the Fed’s announcement earlier this month that it intends to hold short-term interest rates near zero until at least the middle of 2013, a reflection of its view that growth will not be fast enough during that period to drive up wages and prices.

Many investors had viewed that announcement as merely the opening of a new round of efforts by the Fed to bolster an economy that once again is struggling to grow. The government said Friday that it now estimated the economy expanded at an annual pace of just 1 percent in the second quarter, down from its initial estimate of a 1.3 percent annual pace.

Friday’s speech was eagerly anticipated because Mr. Bernanke and his predecessors have made a habit of coming to this conference, hosted by the Federal Reserve Bank of Kansas City, to clarify their views on the economy and monetary policy.

Last year, Mr. Bernanke used his remarks here to provide the first substantial indication that the Fed intended to renew its economic aid campaign. The central bank went on to buy $600 billion in Treasury securities between November and June, increasing its total portfolio of Treasuries and mortgage securities to more than $2.5 trillion.

This year, Mr. Bernanke noted that the nation faces significant challenges, including huge amount of unemployment and an unsustainable federal debt. But the speech marked a return to the Fed’s position earlier this year that it has largely exhausted the power of monetary policy and that the rest of government must do more through fiscal policy.

“Most of the economic policies that support robust economic growth in the long run are outside the province of the central bank,” Mr. Bernanke said.

While offering his standard disclaimer that the Fed would take any steps necessary to help the economy, he notably omitted any description of possible measures. He did say, however, that a scheduled meeting of the Fed’s policy-making committee in late September would be extended to two days from one day “to allow a fuller discussion.”

Article source: http://www.nytimes.com/2011/08/27/business/economy/federal-reserve-chairman-offers-no-new-stimulus.html?partner=rss&emc=rss

Global Concern Over U.S. Debt Ceiling Disagreement

Their worries stem from an inescapable reality: for other governments, there is still no good alternative to holding the almighty dollar, or American Treasury securities, even if the United States gets tarnished by a once-unthinkable credit downgrade.

China, which has the most to lose because it holds the largest amount of Treasuries — at least $1.16 trillion — offered a blistering attack on Washington on Friday, calling for a show of responsibility and an end to the partisan bickering.

“The ugliest part of the saga is that the well-being of many other countries is also in the impact zone when the donkey and the elephant fight,” the state-run news agency, Xinhua — considered the propaganda arm of the Communist Party — said in an opinion piece Friday, referring to the standoff between Democrats and Republicans.

Xinhua said the “irresponsible” brinksmanship in Washington risked “strangling the still fragile economic recovery of not only the United States but also the world as a whole.”

Officials in Europe were more diplomatic, but archly recalled that American leaders had admonished them just a few weeks ago to straighten out the messy politics of the Continent’s own debt crisis.

“One could now ask why is the U.S. debt treated any better than a country like Portugal, which has about the same levels of deficit and debt,” said a senior European policymaker, who spoke on condition of anonymity.

The main concern in Europe is that a Washington failure to lift the debt limit will cause the dollar to weaken further, pushing up the euro and making it harder for Europeans to work out their problems.

That is also among the worries for Japan, the second biggest among United States creditors, whose post-tsunami economic problems would only worsen if the yen rises further against the dollar.

Around the world, many leaders seem to expect the Washington showdown to somehow end in an uneasy truce, given the dire global and domestic political consequences of failing to do so.

But while no one seems to expect the United States to default on its debt, governments elsewhere are girding for the repercussions of the likely tarnishing of America’s sparkling credit rating.

Analysts expect China to continue buying American debt, because China keeps producing big trade surpluses that bring in dollars, which must then be reinvested in a haven, like United States Treasuries.

Except that Treasuries may no longer seem as safe as they once did. And China knows it. The Xinhua article warned that China may be “forced” to reduce its purchases if the United States government were to lose its triple-A rating.

There are limits to cutting back because other large bond markets, in Europe and Japan, are not nearly as liquid. “As long as the dollar remains the dominant currency there’s little choice for many in the public sector but to hold U.S. debt,” said the senior European policy maker.

That sentiment is widely shared.

“You still cannot find an asset as safe as U.S. government bonds, even if there is a credit downgrade,” said Choi Jong-ku, South Korea’s deputy minister for international affairs at the Ministry of Strategy and Finance.

And yet, that does not mean countries might not slightly reduce their purchases of long-term American debt, as China and some others have already shown signs of doing. Whether that is a temporary slowdown or will prove more lasting is a question that worries Washington.

Some experts say there is room for China to steer slightly more money toward Europe or Japan, and buy up more dollar-denominated stocks, rather than debt, while also pushing ahead with its own financial reforms to slow its accumulation of dollars.

Like China, Japan has several reasons to be jittery about America’s debt crisis. There are concerns in Tokyo, for example, that a possible downgrade could shake investor confidence in Japan’s own mushrooming debt, which is already twice the size of its $5 trillion economy.

“As the world’s biggest economy, the U.S. has a big and immeasurable impact on global financial markets, and Japan would not escape the damage,” Hidetoshi Kamezaki, a Bank of Japan board member, said this week, urging American officials to strike a deal on the matter.

Contributing reporting were David Barboza from Shanghai, Hiroko Tabuchi from Tokyo, Sang-Hun Choe from Seoul, Jack Ewing from Frankfurt and Stephen Castle from London.

Article source: http://feeds.nytimes.com/click.phdo?i=758f888981538c11f4722a92fb6dd506