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Economic News, Data and Analysis

Job Growth “Hits the Wall”

Ouch. Hopes that we might avoid an economic slowdown took a beating today with the release of the August employment data.
Payroll employment is was down 4,000 for the month – the first decline since 2003. This seems to be the latest sign of a downward trend in the job market, and in the economy more broadly. The unemployment rate remained at 4.6 percent, but that was due to a significant number of people (340,000) leaving the labor force (not just teens going back to school, but also adult men.) Without this exodus, the unemployment rate would have increased by a couple tenths of a percent. (For more details, see “Job growth hits the wall as financial turmoil hits the jobs market” over at EPI.)
The last two months were also revised downwards, showing gains of just 68,000 and 69,000 – so this month’s weakness is not just a blip. And despite recent export gains, manufacturing employment fell significantly as well. With these troubles spreading, things are more likely to get worse, not better.
This may be a sign that the housing/subprime meltdown is already hitting the labor market. It is increasing looking like a broader economic slowdown (with rising unemployment to come eventually) is a real possibility in the near future. Given this, it would be wise to start exploring ways to regenerate growth: a cut in interest rates would be the quickest to enact a change (the fed meets on the 18th, but could always act ahead of that).
Congress might also begin thinking about a jobs package to keep a slowing economy from grinding into recession. Given how long it takes to move legislation through congress and the president, it makes sense to at least begin the process sooner rather than later. The good news is that a fiscal stimulus could also be used to pursue other national interests that have been neglected. Investing in infrastructure and energy conservation could add jobs and help offset whatever slowdown might be in the pipeline. Economic policy needs to be based on productive investment and the creation of good jobs.
The bottom line is that we need economic policy that WORKS; one that fosters the conditions for economic growth and leads to strong job and wage growth. Clearly, we don’t have that now.

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