Economy sheds jobs, but market tops 11,000

10/9/2010

WASHINGTON - Driven by government layoffs, the U.S. economy shed a worse-than-expected 95,000 jobs in September, the Labor Department said Friday.

The jobless rate remained unchanged at 9.6 percent. It has been at or above 9.5 percent for 14 months, the longest stretch since the Great Depression.

Private-sector employment rose by 64,000 jobs, but federal and local government layoffs exceeded them, totaling 159,000. Of those, 77,000 were temporary federal census workers, while local governments trimmed payrolls by 76,000 - many of them teachers.

Financial markets largely shrugged off the jobs report, however, taking it as one more reason to expect bolder moves to stimulate the economy from the Federal Reserve.

Stocks on Wall Street gained, with the blue-chip Dow Jones industrial average closing above 11,000 for the first time since May.

"I think the Fed is going to act in November. They need to press harder on the accelerator," said Ryan Sweet, a senior economist at Moody's Economy.com in West Chester, Pa.

Some Fed officials are not so sure.

St. Louis Fed President James Bullard told CNBC television that policymakers could wait until December for more data on the economy's outlook.

The recovery from the longest and deepest downturn since the 1930s has slowed, but neither Fed officials nor economists believe a new downturn is likely.

"The economy continues to crawl forward at a sub-2 percent growth pace, enough to generate a handful of private sector jobs but not enough to prevent the unemployment rate from rising further in coming months," said Nigel Gault, an economist at IHS Global Insight in Lexington, Mass.

President Obama tried to put a good face on the job numbers while speaking at a factory in Bladensburg, Md., near Washington.

"We've now seen nine straight months of private-sector job growth," he said, acknowledging that it was insufficient to reduce the unemployment rate. "We have to do everything we can to accelerate this economy."

In Ohio, House Republican leader John Boehner said the latest report on unemployment looked a lot like the reports every month under Mr. Obama's economic stimulus plan.

"This coming election is about one issue: jobs," Mr. Boehner said.

"It's about jobs that were promised to the American people by the current administration, and were never delivered," he said.

One reason the spike in unemployment is showing up now is that teachers who were notified of their layoffs when school ended in the spring fell off the payrolls in September.

More layoffs are expected from state and local governments despite a $26 billion aid package that Mr. Obama signed into law in August.

The recession devastated state and local budgets.

Some signs of economic life did emerge from the otherwise bleak report.

Health care added 24,000 jobs and the leisure and hospitality sector gained 34,000 jobs. Temporary jobs rose by 16,900, usually a first step toward full-time hiring.

However, construction slumped again, by 21,000, and manufacturing lost 6,000 jobs.

"Another tough read on the job market, which is much better than it was a year ago, but is still not good enough," said Mark Zandi, the chief economist for Moody's Analytics.

Mr. Zandi said the economy is in a slow-growth mode where it's adding about 75,000 private-sector jobs a month on average - but not enough to reduce unemployment.

"This is about half the monthly job growth needed to forestall a further increase in unemployment, which is headed back toward double digits," he said.

"Businesses are no longer laying off workers, but they remain very reluctant to hire, given a lack of credit for small businesses and a lack of confidence across all businesses."

In September, 14.8 million Americans were jobless, 6.1 million of them for more than six months, but that's down by 640,000 from the peak in May.

A broader unemployment measure - including those who've given up seeking work, or are working part time but want to work full time - rose by 400,000 to 17.1 million.

Still, Mr. Zandi cited some reasons for hope.

"The preconditions for a better job market are coming into place," he said. "Corporate profits are surging, and corporate balance sheets are strong.

"It is increasingly no longer a question of can businesses expand, but are they willing? As we get into next year and the policy uncertainty fades and more time passes since the nightmare of the Great Recession, businesses will become more emboldened and begin to hire," he said.

In addition, the government revised data for July and August to show 15,000 more jobs were lost than previously reported.

It also said its preliminary benchmark revision estimate indicated employment in the 12 months to March had been overstated by 366,000.