US economy creates zero jobs in August: Is the risk of recession rising?
The US economy posted no net gain in jobs during August, as government employment fell and private-sector job creation saw a significant slowdown.
In all, just 17,000 private-sector jobs were created. Even accounting for some 45,000 jobs that may be only temporarily lost by a strike at Verizon, August remains the weakest month this year. The public sector shed 17,000, the Labor Department reported Friday.
With the unemployment rate holding flat at 9.1 percent, the job news did little to ease debate over whether the nation could be dipping back into recession.
By itself, the report doesn't provide a clear signal one way or the other. A larger gain in private-sector jobs would have helped buoy hopes that the economy is shifting from a summer slowdown to firmer footing.
"Are we uncomfortably close to a recession? Yeah, we don't have a whole lot of buffer," says Ken Mayland, a forecaster at ClearView Economics near Cleveland.
Still, he argues that the economy should be able to avoid a recession, which is defined as a broad-based decline in economic activity that lasts more than a few months.
"I'd be very hesitant to start calling it a recession or start saying we're in a recession," Mr. Mayland says.
Most professional forecasters takes a similar view, calling such a slump a danger but a recession is not the likeliest scenario.
Some recent indicators have provided comfort, while others have raised warning flags.
New claims for jobless benefits haven't been surging, a signal that companies aren't rushing to lay off workers. And the so-called ISM index of manufacturing activity, gathered monthly by the Institute for Supply Management, stayed in expansion mode when it was released this week, despite forecasts that it would turn negative..
But overall economic growth has been running below 2 percent this year, which some say is near "stall speed." In other words, at that slow pace it wouldn't take much of a negative shock to cause a recession. When the economy gets that cool, a recession often follows.
The jobs weakness was visible in August across a broad spectrum of industries, from manufacturing to retail and high-tech companies.
Average hourly wages fell slightly. The total number of unemployed people held roughly steady at about 14 million. The number of people working part-time, who said they'd rather be working full-time, rose by 430,000.
This comes as most forecasters had been predicting a pickup in economic activity during the year's second half. That could still happen, but economists have scaled back their expectations.
Even looking a few years ahead, the White House released an "alternative" forecast this week (taking account of the recent downshift) that envisions the unemployment rate staying at 9 percent in 2012 and 8.5 percent in 2013.
Why has the job market cooled so much? An important factor, many economists say, is that signals from government lately have been hurting rather than helping confidence. The protracted talks over the nation's debt ceiling this summer appeared to dampen the spirits of consumers and businesses alike.
Financial markets have also been rattled by worries about whether European nations can successfully navigate their sovereign debt crisis. Those worries weighed on global stock markets Friday, even before the US job numbers came out.
By mid-morning, the Dow Jones Industrial Average was down 2 percent for the day, just under 11,300.
As of early August, the average forecast of US economists surveyed by Blue Chip Economic Indicators calls for economic growth of 1.8 percent for the current calendar year, and 2.5 percent in 2012. In other surveys, forecasters have pegged the risk of a recession during that stretch at about 1 in 3.
Economists at Morgan Stanley cite several factors that should help avert a recession: strong corporate finances, an easing of oil prices, and the prospect that global central banks will pursue additional easing of monetary policy.
