Saturday, December 8, 2007

Slowing Job Growth Seen as Ominous Sign for Economy

The nation gained a modest 94,000 jobs in November, the Labor Department reported yesterday, pulling back considerably from the previous month in the clearest sign yet that the American economy was headed for a substantial slowdown.

But the jobs report, a much-anticipated indicator of the health of the economy, also provided some comfort that the United States had not slipped into a recession and might not be weakening as rapidly as some experts feared. With business leaders expressing uncertainty about the prospects for further growth, analysts said, a better view of the direction of the economy was not likely to emerge until next year.

“The expansion is intact, but increasingly frayed,” said Mark Zandi, chief economist at Moody’s The job creation numbers are “indicative of a very fragile economy that will come undone unless conditions improve soon.”

The unemployment rate held steady at 4.7 percent for the third consecutive month, as a survey of households found strong growth in the number of people saying they found new jobs last month.

On Wall Street, markets barely moved yesterday, absorbing the jobs data with ambivalence. The employment picture offered assurance that the economy was not plummeting and might continue to expand, sustaining corporate profits. But those very assurances sowed worry that the Federal Reserve would feel less pressure to ease interest rates aggressively when it convened on Tuesday.

A number of market participants have urged a half-point cut in the Fed’s key throttle control over the banking system, currently at 4.5 percent, but a stronger job market may make a quarter-point cut in the federal funds rate more likely.

Central bankers have signaled that they intend to try to avert a recession with looser credit, but remain wary of fueling inflation with an unnecessarily sharp cut in rates — particularly in a period of high oil costs and rising food prices.

“Financial markets can kiss goodbye any chance of a half-point cut,” said Ellen Zentner, United States macroeconomist at Bank of Tokyo-Mitsubishi in New York. “The kind of average jobs growth we’ve been getting, in the neighborhood of 100,000 per month, is like butter to the Fed, which looks to keep job creation going, but not so much so that wage inflation becomes a concern.”

Average hourly wages among rank-and-file workers — about four-fifths of the work force — rose 8 cents, to $17.63 last month, according to the jobs report. But the November wage came against a more pronounced backdrop pointing to a longer-term erosion of spending power for most American workers.

While many Americans at the top of the income ladder have done well, wage gains in the current economic expansion have been generally weak. The inflation-adjusted hourly wage for rank-and-file workers has risen by just a penny over the last four years, from $17.62 in November 2003. Over the last year, they have actually fallen.

“Workers are still very anxious about their economic security,” said Andrew Stettner, interim director of the National Employment Law Project in New York.

The biggest job losses were concentrated in housing, which has been hit hard this year by the collapse of the real estate bubble. But employment in services rose, with business and professional services up a healthy 30,000. Education and health gained jobs and retail payrolls broke a string of three consecutive losses to increase by more than 24,000.

All the figures are adjusted to take account of seasonal variations and include the Labor Department’s best estimate of jobs created by new firms, which makes them subject to potentially large revisions next year.

In Tucson, Sue Foust was sifting through options for new jobs yesterday, having been laid off from an AOL software testing site, where she worked for the last decade. Ms. Foust, 41, had been making about $65,000 a year as a software quality assurance engineer, she said. Comparable prospects seemed poor, and she was growing resigned to finding secretarial work.

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