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US private hiring slowed ahead of shutdown

October 23, 2013 at 1:03 am | News Desk

US private hiring slowed ahead of shutdown Washington:  US businesses hired at a tepid pace in September as the Washington battle over the budget and debt ceiling headed toward a government shutdown, Labor Department data showed Tuesday.

The economy generated a less-than-expected 148,000 jobs during the last month, just barely above the average for the third quarter, and well below the 195,000 a month gain in the first half of the year.

Of that only 126,000 jobs came from the private sector, expected to drive the recovery, while the expansion in hiring of teachers and other school officials at the state level — where layoffs were intense during and after the recession — made up much of the balance.

Analysts said the data — released more than two weeks late due to the shutdown — confirmed a lull in growth in the third quarter and said that the fall in hiring numbers would likely continue due to the 16-day government shutdown that ended last Thursday.

That likely points to the Federal Reserve keeping its stimulus program in place for the rest of the year, they said.

“We would be astonished now if the Fed were able to taper this year; even March looks like a struggle,” said Ian Shepherdson at Pantheon Macroeconomics.

September’s hiring and a modest upward revision to the numbers from the previous two months nevertheless helped push the unemployment rate down a notch to 7.2 percent, the lowest level since November 2008, just as the country was plunging into deep recession.

Although the rate was down from 7.8 percent a year ago, analysts said that a very low and unbudging rate of participation in the jobs market underpinned the gains.

With 11.25 million Americans still officially jobless, the data showed the employment-to-population ratio at 58.6 percent, where it has stayed for nearly two years and well below the 63 percent range of 2006-2007.

Likewise, the labor force participation rate remained at an historical low of 63.2 percent.

“This continues the pattern that we have seen throughout the recovery as the unemployment rate falls mainly because workers leave the labor market,” said Dean Baker of the Center for Economic and Policy Research.

The White House tied the disappointing numbers to Republican pressure to cut spending and the budget and debt ceiling showdown that intensified throughout September.

Private sector job creation was “lower than we can be fully satisfied with, partially reflecting the effects of fiscal contraction,” said Jason Furman, chairman of the President Barack Obama’s Council of Economic Advisers, in a statement.

“This underscores the continued importance of taking steps that speed the recovery and boost job creation, while avoiding self-inflicted wounds like a government shutdown and debt ceiling brinksmanship that have the opposite effect.”

The private sector job gains were strongest in transportation, construction, wholesale and retailing, and temporary help services.

There were some bright spots in the numbers. Government hiring expanded for the second straight month, with a net 22,000 new positions, mostly at the state and local level.

Hourly earnings continued to rise slowly, and were up 2.1 percent year on year. The number of those unemployed for more than 27 weeks fell, as did the number of those who said they were forced to take only part-time jobs.

The slow hiring by the private sector could have been influenced by fears rising throughout September that the government would be shut down at the beginning of the 2014 fiscal year on October 1 because Congress would not agree on a budget.

The 16 day shutdown idled hundreds of thousands of federal workers for two weeks and took an estimated $24 billion out of the economy.

Economists say that will result in skewed and likely poor jobs and economic growth data for October and November, preventing anyone from getting a clear picture of how the economy is doing.

That then was likely to put on hold any action the Fed might have taken to begin tapering its $85 billion a month in bond purchases.

Since April the Fed has pointed to reducing its stimulus beginning late this year as the economy was expected to gain speed.

But most now see that only beginning early next year.

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