U.S. employment numbers suggest economic slowdown

The United States gained only 94,000 jobs in November, the Labor Department announced, a considerable retreat from the month before, adding the strongest signal yet that the economy appears to be headed for a significant slowdown.

U.S. employment numbers suggest economic slowdown
But the jobs report - an important indicator of the overall health of the economy - also provided some comfort that the United States has not slipped into recession and may not be weakening as rapidly as some have feared.

The unemployment rate held steady at 4.7 percent for the third consecutive month, as a survey of households found surprisingly strong growth in employment.

"The expansion is intact, but increasingly frayed," said Mark Zandi, chief economist at Moody's Economy.com. "Job creation is just enough to keep us out of recession, but not enough to keep recession at bay for much longer. It's indicative of a very fragile economy that will come undone unless conditions improve soon."

On Wall Street, markets absorbed the labor data with ambivalence. On the one hand, the employment picture offered assurance that the economy was not plummeting and may continue to expand, bolstering corporate profits. On the other hand, those very assurances sowed worry that the Federal Reserve will feel less pressure to ease interest rates when it convenes on Tuesday.

Some market participants have called for an aggressive half-point cut, but a stronger job market may make a quarter-point cut more likely. Central bankers have signaled that they intend to ward off a recession with looser credit, but several remain wary of fueling inflation with an unnecessarily sharp cut, particularly in a period of unusually high oil prices.

"Financial markets can kiss goodbye any chance of a half point cut at next week's meeting," said Ellen Zentner, U.S. macroeconomist at Bank of Tokyo-Mitsubishi in New York. "The kind of average jobs growth we've been getting, in the neighborhood of 100,000 per month, is like butter to the Fed, which looks to keep job creation going, but not so much so that wage inflation becomes a concern."

Indeed, average hourly wages among rank-and-file workers - about four-fifths of the work force - ticked up 8 cents, to $17.63 last month, according to the jobs report.

Some economists were puzzled by the bump in wages, given that high-paying jobs in manufacturing and financial services continued to erode last month, while many of the new jobs came in lower-paying retail.

The November wage increase came against a more pronounced backdrop - an erosion of spending power for most U.S. workers.

Wage gains in the current economic expansion have been weaker than in decades past. Over the last four years, the inflation-adjusted hourly wage for rank-and-file workers has risen by just a penny, from $17.62 in November 2003. After taking inflation into account, wages have actually fallen over the last year, from roughly $17.69 last November.

"The basic family budget and outlook is still insecure," said Andrew Stettner, interim director of the National Employment Law Project in New York. "Workers are still very anxious about their economic security."

That sense of insecurity continues to gnaw at the economy, as reflected in surveys of consumer confidence. Given that consumer spending makes up 70 percent of the U.S. economy, economists continue to worry that a weakening job market will translate into less spending, which could deliver a downward spiral of pain: less investment by companies, and less hiring as business dries up.

Though the report Thursday eased worries that such a spiral had already begun, it did little to eliminate concerns about the future.

"It tells you that we're not in a recession now," said Jan Hatzius, chief U.S. economist at Goldman Sachs. "There was a question about that before."


Güncelleme Tarihi: 08 Aralık 2007, 15:17