Employers add no net jobs in August; unemployment rate unchanged

WASHINGTON (AP) - Employers stopped adding jobs in August, an alarming setback for an economy that has struggled to grow and
might be at risk of another recession.
The government also reported that the unemployment rate remained at 9.1 percent. It was the weakest jobs report since September 2010.
Stocks tumbled on the news. The Dow Jones industrial average
sank more than 160 points in morning trading.
Total payrolls were unchanged in August, the first time since
1945 that the government has reported a net job change of zero.
Economists warned that the economy can't keep growing indefinitely
if hiring remains stalled.
"Underlying job growth needs to improve immediately in order to
avoid a recession," said HSBC economist Ryan Wang.
Fears that the United States will slip back into recession have
been rising since the government reported over the summer that the
economy barely grew in the first half of the year. Consumer and
business confidence has been sapped by the political standoff over
the federal debt limit, a downgrade in the U.S. government's credit
rating and a debt crisis in Europe.
Job growth had already been sputtering before it stalled
completely last month. The economy produced an average 166,000 a
month in the first quarter, 105,000 a month in the second quarter
and just 28,000 a month so far in the third quarter, said John
Silvia, chief economist at Wells Fargo.
The dispiriting job numbers for August will put more pressure on
the Federal Reserve, President Barack Obama and Congress to find
ways to stimulate the economy. So far, Fed Chairman Ben Bernanke
has been reluctant to try a third round of bond purchases designed
to jolt the economy by further lowering long-term interest rates.
Obama next week will deliver a rare address to a joint session
of Congress to introduce a plan for creating jobs and boosting
economic growth. But House Republicans have resisted any federal
stimulus spending.
On Friday, Obama took a step toward winning Republican support.
He directed the Environmental Protection Agency to abandon rules
that would have tightened health-based standards for smog.
Congressional Republicans and some business leaders have objected to the proposed rules, saying they would have cost jobs.
The weakness in employment was underscored by revisions to the jobs data for June and July. Collectively, those figures were
lowered to show 58,000 fewer jobs added. The downward revisions
were all in government jobs.
The average work week also declined, and hourly earnings fell by
3 cents to $23.09.
"There is no silver lining in this one," said Steve Blitz,
senior economist at ITG Investment Research. "It is difficult to
walk away from these numbers without the conclusion that the
economy is simply grinding to a halt."
With job creation stalled and wages declining, consumers won't
see much gain in incomes. That will limit their ability to spend,
which undercuts growth. Consumer spending accounts for about 70
percent of the economy.
"The importance of job growth cannot be overstated," said
Joshua Shapiro, chief U.S. economist at MFR Inc.
The economy needs to add roughly 250,000 jobs a month to rapidly bring down the unemployment rate, which has been above 9 percent in all but two months since May 2009.
In August, the private sector added 17,000 jobs, the fewest
since February 2010. That compares with 156,000 in July and 75,000
in June.
"The stagnation in US payroll employment is an ominous sign,"
said Paul Ashworth, an economist at Capital Economics. "The broad
message is that even if the US economy doesn't start to contract
again, any expansion is going to be very, very modest and fall well
short of what would be needed to drive the still elevated
unemployment rate lower."
Hiring fell across many different sectors. Manufacturers cut
3,000 jobs, its first decline since October 2010. Construction
companies, retailers, and transportation firms also cut workers.
The health care industry added 30,000 jobs last month.
The economy expanded at an annual pace of only 0.7 percent in
the first six months of the year. That was the slowest six months
of growth since the recession officially ended in June 2009.
In August, consumer confidence fell to its lowest level since
April 2009, according to the Conference Board.
Most economists forecast that growth may improve to about a 2
percent annual rate in the July-September quarter. But that's not
fast enough to generate many jobs.
The Obama administration has estimated that unemployment will
average about 9 percent next year, when Obama will run for
re-election. The rate was 7.8 percent when Obama took office.
The White House Office of Management and Budget projects overall growth of only 1.7 percent this year.
"The economy continues to stagger," said Sung Won Sohn,
economist at California State University Channel Islands. "It
wouldn't take much (of a) shock to tip it onto a recession."

(Copyright 2011 by The Associated Press. All Rights Reserved.)

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