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Strong Job Growth Eases Recession Fears
Friday, October 5, 2007
WASHINGTON -- Employers added 110,000 new jobs in September and August's job
loss was revised to a gain, the Labor Department said on Friday in a report
implying the economy will avoid recession and keep growing moderately.
Stock prices were higher at mid-morning on the strong economic data. Bond
prices were down as investors bet it reduced chances for any further early
cuts in official interest rates by the Federal Reserve though analysts said
it still showed a less-than-robust hiring pace.
The unemployment rate edged up to 4.7 percent from 4.6 percent in August and
was the highest since 4.8 percent in July 2006 as the size of the labor
force increased.
The payrolls data and the jobless rate are compiled from separate surveys
and it was the jobs number -- especially the July and August revisions --
that drew analysts' attention.
The department said 89,000 jobs were created in August, rather than the
4,000 that it reported last month were lost. It also said 93,000 jobs were
created in July instead of 68,000 it previously reported -- a total of
118,000 more jobs in the July-August period than it had earlier estimated.
PRESIDENT PLEASED
President George W. Bush told reporters the monthly jobs report demonstrated
a "vibrant economy. ... (but) I don't take good news for granted."
Economist Joel Naroff of Naroff Economic Advisors in Holland, Pennsylvania,
noted that monthly job gains since last spring have not been particularly
strong. "They have continued at a pace that is enough to keep the economy
out of recession, but not enough to generate strong growth," Naroff said.
The September total for jobs created outside the farm sector was modestly
higher than the 100,000 that economists surveyed by Reuters had forecast but
it was overshadowed by big upward revisions in July and August hiring.
The reason cited for the reversal in the department's August hiring
estimate -- to a gain instead of a loss - was the government underestimated
the hiring of teachers to start a new school year.
STRAINS CONTINUE
Policy-makers acknowledge the economy is under strain because of an extended
slowdown in the U.S. housing industry and problems with bad loans in the
subprime mortgage sector.
But Fed Vice Chairman Donald Kohn told the Philadelphia Chamber of Commerce
the U.S. central bank tried to get ahead of the problems with last month's
half-percentage-point cut in official interest rates and saw better growth
ahead.
"Once we get through the near-term weakness caused by the extra downleg from
the housing contraction and any spillover from tighter credit conditions, I
am looking for moderate growth with high levels of employment," Kohn said.
The bulk of the gains in September hiring came in service industries,
including an addition of 44,000 in education and health services and 37,000
in the government. In the goods-producing sector, 18,000 factory jobs were
shed and 14,000 construction jobs were lost.
Some analysts cautioned that, notwithstanding the relatively strong
third-quarter job performance, the pace of hiring may soften. The U.S.
housing sector remains in decline and the consequences of disruptions in
financial markets stemming from U.S. subprime mortgage problems have not yet
been fully felt.
"It shows that in the immediate aftermath of all the turmoil on Wall Street
in July and August, Main Street jobs were still growing, particularly in the
private sector at a moderate pace," said Stuart Hoffman, chief economist at
PNC Financial Services Group, Pittsburgh.
"Maybe it does say that the Fed skips the month of October on a rate cut,
but there is still evidence here that job growth is not growing like it
was," Hoffman said.
Strong Job Growth Eases Recession Fears
Friday, October 5, 2007
WASHINGTON -- Employers added 110,000 new jobs in September and August's job
loss was revised to a gain, the Labor Department said on Friday in a report
implying the economy will avoid recession and keep growing moderately.
Stock prices were higher at mid-morning on the strong economic data. Bond
prices were down as investors bet it reduced chances for any further early
cuts in official interest rates by the Federal Reserve though analysts said
it still showed a less-than-robust hiring pace.
The unemployment rate edged up to 4.7 percent from 4.6 percent in August and
was the highest since 4.8 percent in July 2006 as the size of the labor
force increased.
The payrolls data and the jobless rate are compiled from separate surveys
and it was the jobs number -- especially the July and August revisions --
that drew analysts' attention.
The department said 89,000 jobs were created in August, rather than the
4,000 that it reported last month were lost. It also said 93,000 jobs were
created in July instead of 68,000 it previously reported -- a total of
118,000 more jobs in the July-August period than it had earlier estimated.
PRESIDENT PLEASED
President George W. Bush told reporters the monthly jobs report demonstrated
a "vibrant economy. ... (but) I don't take good news for granted."
Economist Joel Naroff of Naroff Economic Advisors in Holland, Pennsylvania,
noted that monthly job gains since last spring have not been particularly
strong. "They have continued at a pace that is enough to keep the economy
out of recession, but not enough to generate strong growth," Naroff said.
The September total for jobs created outside the farm sector was modestly
higher than the 100,000 that economists surveyed by Reuters had forecast but
it was overshadowed by big upward revisions in July and August hiring.
The reason cited for the reversal in the department's August hiring
estimate -- to a gain instead of a loss - was the government underestimated
the hiring of teachers to start a new school year.
STRAINS CONTINUE
Policy-makers acknowledge the economy is under strain because of an extended
slowdown in the U.S. housing industry and problems with bad loans in the
subprime mortgage sector.
But Fed Vice Chairman Donald Kohn told the Philadelphia Chamber of Commerce
the U.S. central bank tried to get ahead of the problems with last month's
half-percentage-point cut in official interest rates and saw better growth
ahead.
"Once we get through the near-term weakness caused by the extra downleg from
the housing contraction and any spillover from tighter credit conditions, I
am looking for moderate growth with high levels of employment," Kohn said.
The bulk of the gains in September hiring came in service industries,
including an addition of 44,000 in education and health services and 37,000
in the government. In the goods-producing sector, 18,000 factory jobs were
shed and 14,000 construction jobs were lost.
Some analysts cautioned that, notwithstanding the relatively strong
third-quarter job performance, the pace of hiring may soften. The U.S.
housing sector remains in decline and the consequences of disruptions in
financial markets stemming from U.S. subprime mortgage problems have not yet
been fully felt.
"It shows that in the immediate aftermath of all the turmoil on Wall Street
in July and August, Main Street jobs were still growing, particularly in the
private sector at a moderate pace," said Stuart Hoffman, chief economist at
PNC Financial Services Group, Pittsburgh.
"Maybe it does say that the Fed skips the month of October on a rate cut,
but there is still evidence here that job growth is not growing like it
was," Hoffman said.
