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By Michael Kanell
Atlanta Journal-Constitution
Saturday, October 7th, 2006
The parade of lackluster job reports continued in September as American payrolls grew by just 51,000 jobs, the worst performance since last October, the government said Friday.
"It seems that employers are taking a pause," said economist Michael Donihue of Colby College in Maine. "This fell below what I was expecting."
The job growth number was less than half of what most economists predicted. But the weak performance was partially mitigated by Bureau of Labor Statistics revisions that added jobs during the two previous months.
Even so, job growth has slowed from what was already a subpar expansion.
The BLS, and most economists, emphasize the payroll survey as the most reliable guide to job growth. But a second, much smaller survey of households did provide better news. That survey showed the unemployment rate dipping 0.1 percentage point to a healthy-sounding 4.6 percent.
Job creation has been uneven.
The economy has kept adding a modest number of high-paying jobs, but the proportion of lower-paying jobs has slipped, according to Rajeev Dhawan, director of the Economic Forecasting Center at Georgia State University. "That is why the overall jobs number is low."
The shortfall, and the economy's imbalance, may be reflected in other ways.
For instance, the jobless rate for white men older than 20 scraped the floor at 3.3 percent. Yet 8.3 percent of black men were jobless, as were 13.8 percent of all teenagers.
Moreover, people older than 55 have accounted for about half the employment growth since May, according to Dean Baker, co-director of the Center for Economy and Policy Research. By contrast, the number of jobs for people between 35 and 44 dropped, as did those for teenagers.
Perhaps most troubling for the overall economy was softness in several key sectors:
> Retail payrolls last month slipped by 11,900 jobs, despite hopes that lower gas prices would send consumers back to the stores. The sector, which has shrunk for six of the past nine months, is usually counted on for a hiring binge as the holidays approach.
> Manufacturing dropped 19,000 jobs during September, while fewer hours were worked.
Roughly one in 12 manufacturing jobs has vanished just in the past year, and the hemorrhaging continues. For instance, Atlanta-based Swift Galey, which makes denim products, last month announced plans to close its Columbus facility. Up to 800 jobs will be cut by October's end, according to a filing with the Department of Labor.
> The temporary-help sector, often seen as an early signal on the economy's direction, lost 11,300 jobs in September.
Yet in metro Atlanta at least, placements are up,especially for clerical workers, financial companies and call centers, according to David Bishop, regional vice president of staffing company Adecco.
"People are more confident about changing jobs," he said. "And I'd say we place 65 to 70 percent of the people we interview in the same week."
Nationally, expanding sectors last September included health care, restaurants and residential construction. Real estate payrolls also held steady.
But with home sales slowing, dramatically in some regions, those numbers are bound to start dragging down the overall jobs report, Baker said.
"This report provides evidence of a slowing economy," he said. "This report was not hugely weak, but it was ominous."
Yet the danger of job weakness can also be overstated, especially if the report persuades the Federal Reserve not to lift interest rates again, argued Owen Malcolm, vice president of Sanders Financial Management in Norcross.
Economic strength is still broad, he said. Job growth may be modest, but it's steady, while corporate profits are strong and consumer spending has been persistent.
"There is a lot more right than there is wrong," he said. "The greatest catalyst for a recession, not counting geopolitical events, would be an overactive Fed. So moderately bad news is good news if it keeps the Fed from raising rates."
After pushing short-term rates to four-decade lows in an urgent effort to spur growth during the 2001 recession and its jobless aftermath, the Fed reversed course in 2004. The benchmark rate has been lifted from 1 percent to 5.25 percent.
Those rate increases make business and consumer borrowing more costly. But most economists do not predict a recession —- just deceleration followed by renewed growth.
That scenario depends largely on an orderly, not panicked, retreat by the housing market.
And so far, so good, economist Dhawan said. Real estate will keep slowing, job growth will remain sluggish and then the Fed will start lowering interest rates again, he predicted.
"Before the fire gets out of control in the housing sector, they will cut," Dhawan said. "Probably in January."
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