Public Jobs Drop Amid Slowdown in Private Hiring

By CATHERINE RAMPELL

Published: October 8, 2010 - New York Times

In the one-two punch long feared by many economists, hiring by businesses has slowed while government jobs are disappearing at a record pace.

Companies added just 64,000 jobs last month, a slowdown from 93,000 jobs in August and 117,000 in July, the Labor Department reported Friday. But over all, the economy lost 95,000 nonfarm jobs in September, the result of a 159,000 decline in government jobs at all levels. Local governments in particular cut workers at the fastest rate in almost 30 years.

“We need to wake up to the fact that the end of the stimulus has really hit hard on local governments,” said Andrew Stettner, deputy director of the National Employment Law Project. “There is much more of a slide in the job market than what we really need to clearly turn around.”

With the waning of the $787 billion Recovery Act passed in 2009 and credited with increasing employment by millions of jobs, finding new policies potent enough to speed up the recovery has proved difficult.

President Obama has repeatedly called for additional measures like infrastructure projects and tax incentives, which have been met with opposition from Republicans over deficit concerns. The word “stimulus” itself seems to have become politically toxic in the lead-up to the midterm Congressional elections next month.

Central banks around the world are also confronting contentious choices about whether to use unconventional monetary policy measures to reignite growth.

This latest United States jobs report, the last before the November elections, seems certain to put more pressure on the Federal Reserve to help support economic growth as the federal government’s stimulus fades away. Perhaps because so many investors and analysts now see additional Fed action as a fait accompli, major stock market indexes rose on Friday, with the Dow Jones industrial average topping 11,000 for the first time since May.

Friday’s jobs report led to discouraging forecasts for the rest of the year, given the slowdown in both job and output growth in recent months. Private payrolls have been growing throughout this year, but at a rate too sluggish even to keep up with people entering the work force, much less make a dent in the numbers of unemployed. The nation’s unemployment rate stayed flat in September, at 9.6 percent.

Of particular concern is the fact that the length of the workweek has barely budged in six months and the number of people working part time because they cannot find full-time work continues to climb. If employers are not giving more work to existing employees, economists worry, it may be some time before they can justify additional hiring.

“We’re looking for companies to get more confident in the pace of recovery and start to hire around 150,000 jobs a month, which is what we need just to keep the unemployment rate flat,” said John Ryding, chief economist at RDQ Economics. “But I just don’t see that happening between now and the end of the year.”

Flat hourly wages, now at an average of $22.67, also threaten what fragile confidence American families may have in their household budgets.

“The gain by private-sector payrolls — what was disappointing was the deeper-than-expected decline,” said John Lonski, chief economist for Moody’s Capital Markets. “When you combine that with no change in hourly wage and no change in weekly earnings, this report signals a softening of employment income that will adversely affect the outlook for consumer spending.”

Among the biggest gainers were food services and drinking establishments, which added 33,900 jobs in September, and health care, which added 23,900 jobs.

Government jobs have been disappearing the last few months as the census winds down. Last month, 77,000 Census Bureau employees were let go. But local governments cut 76,000 positions as well. State governments shed 7,000 workers.

Most of the state and local reductions were in education, as staff members were laid off and not recalled at the beginning of the school year. Including private school positions, 72,700 education jobs were eliminated on a seasonally adjusted basis in September.

While the bulk of the education cuts may be over for the year, some worry that another layer of government jobs may follow. Congress interrupted its August recess to pass a $26 billion package aiding school districts and states.

“We need to continue to explore ways that we can help states and local governments maintain workers who provide vital services,” President Obama said in Bladensburg, Md., on Friday. “At the same time, we have to keep doing everything we can to accelerate this recovery.”

Congress has been stuck in a partisan stalemate ahead of the November elections. Asked what kinds of policies Congress should consider to bolster job creation, Representative Carolyn B. Maloney, the New York Democrat who leads Congress’s Joint Economic Committee, said, “What’s important now is to get Democrats re-elected.”

She said that beyond that, passing another extension of unemployment benefits and “getting clarity on the Bush tax cuts” were priorities.

While the president refrained from discussing the Federal Reserve, Christina Romer, the former chairwoman of his Council of Economic Advisers, said policy makers should be firing on all cylinders.

“We still are in the middle of the crisis, and absolutely, the economy needs more help, both monetary and fiscal, to try to get this unemployment rate down,” Ms. Romer said at a Washington forum on global fiscal policy sponsored by the International Monetary Fund and the BBC.

Federal Reserve officials have hinted that they may undertake more unconventional monetary policy measures to try to encourage hiring and ward off deflation. Markets seemed to have already priced in the belief that the Fed will expand its balance sheet to push more money into the system, said Prajakta Bhide, a research analyst at Roubini Global Economics. With interest rates near zero, the expectation is that the Fed will buy long-term bonds, which would cause bond prices to rise and rates to fall. Lower long-term rates would make it more likely that consumers and businesses would spend.

For the 14.8 million people out of work, the picture is not brightening. The average duration of unemployment continues to hover at record highs. In September, the typical unemployed worker had been searching for a job for 33.3 weeks.

“I have been unemployed for almost two years,” said Mary Carter, 38, of Coolidge, Ariz. She used to work for a fencing contractor before the housing market collapsed. “I put in for jobs, no one calls. I put in for more, no one calls.”

Her partner, Antonio Garcia, who is a certified electrician, recently found a part-time job in a market after eight months of unemployment. He is paid minimum wage for 20 hours a week. “I was making $14 and now I’m making $7 an hour,” he says, holding a plastic bag of cans from a local food pantry. “They’ve just stopped building.”