Make us your home page
Instagram

Vicious circle tames jobs picture

WASHINGTON — Companies are more productive, fewer people are seeking unemployment benefits, and service companies are adding jobs.

Ideally, those trends could signal stronger growth, followed by more hiring. Yet until consumers consistently spend more, businesses are unlikely to hire enough workers to drive down unemployment.

But more consumers need jobs and raises to keep spending enough to help the economy grow. The paradox has kept the economy from thriving more than two years after the recession officially ended.

It's also why economists think the unemployment rate stayed at 9.1 percent for a fourth straight month in October. The government will issue the October jobs report today.

"We're creating jobs, but it's not enough to … increase wages measurably," said Ellen Zentner, an economist at Nomura Securities.

Thursday's data reinforced that message. Weekly applications for unemployment benefits dropped to a seasonally adjusted 397,000, the Labor Department said. It's only the third time since April that applications have fallen below 400,000.

Still, applications would need to fall below 375,000 to signal sustained job gains. They haven't been at that level since February.

Services companies, which employ about 90 percent of the workforce, hired more in October after cutting jobs in the previous month, according to a survey by the Institute for Supply Management.

Overall growth for the service sector — which covers businesses from restaurants and hotels to financial services firms and retail companies — was mostly unchanged from September's slow pace.

Companies ordered more factory goods in September for a third straight month, the Commerce Department said. The gain occurred largely because businesses spent more on industrial machinery, computers and software. It's a sign that in the sluggish economy, many companies are investing in equipment but not in new hires.

Businesses are getting more out their existing workforces while paying less to employ them. Worker productivity rose in the July-September quarter by the most in 18 months, the Labor Department said. At the same time, labor costs fell.

Higher productivity is generally a good thing. It can enable companies to pay workers more without raising prices and increasing inflation. But without strong and sustained customer demand, companies are unlikely to hire.

The Federal Reserve now says the economy will likely expand no more than 1.7 percent for all of 2011. That's down from its June forecast of 2.7 to 2.9 percent.

And it predicted growth of only 2.5 to 2.9 percent next year, nearly a percentage point lower than its June estimate.

The Fed said it doesn't expect the unemployment rate to be any lower this year. And it sees unemployment averaging 8.6 percent by the end of next year.

Retail sales lag estimates

Americans were shopping in October, but they were spending at a slower clip than expected as they faced a barrage of bad economic news. October revenue at stores open at least a year — an indicator of a retailer's health — rose 3.7 percent, according to the International Council of Shopping Centers' tally of 25 retailers. But 13 of 19 retailers missed Wall Street estimates for October revenue, according to Thomson Reuters. That included big merchants like Macy's, Saks and Target.

Vicious circle tames jobs picture 11/03/11 [Last modified: Thursday, November 3, 2011 10:57pm]
Photo reprints | Article reprints

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...
  1. Pinellas licensing board asks Sen. Jack Latvala for $500,000 loan

    Local Government

    The troubled Pinellas County agency that regulates contractors wants Sen. Jack Latvala to help it get a $500,000 lifeline from the state to stay afloat.

    State Sen . Jack Latvala, R- Clearwater, is being asked to help the Pinellas County Construction Licensing Board get $500,000 from the state so it can stay open beyond February.  [SCOTT KEELER   |   Times]
  2. In advertising, marketing diversity needs a boost in Tampa Bay, nationally

    Business

    TAMPA — Trimeka Benjamin was focused on a career in broadcast journalism when she entered Bethune-Cookman University.

    From left, Swim Digital marketing owner Trimeka Benjamin discusses the broad lack of diversity in advertising and marketing with 22 Squared copywriter Luke Sokolewicz, University of Tampa advertising/PR professor Jennifer Whelihan, Rumbo creative director George Zwierko and Nancy Vaughn of the White Book Agency. The group recently met at The Bunker in Ybor City.
  3. Tampa Club president seeks assessment fee from members

    News

    TAMPA — The president of the Tampa Club said he asked members last month to pay an additional assessment fee to provide "additional revenue." However, Ron Licata said Friday that the downtown business group is not in a dire financial situation.

    Ron Licata, president of the Tampa Club in downtown Tampa. [Tampa Club]
  4. Under Republican health care bill, Florida must make up $7.5 billion

    Markets

    If a Senate bill called the Better Care Reconciliation Act of 2017 becomes law, Florida's government would need to make up about $7.5 billion to maintain its current health care system. The bill, which is one of the Republican Party's long-promised answers to the Affordable Care Act imposes a cap on funding per enrollee …

    Florida would need to cover $7.5 billion to keep its health care program under the Republican-proposed Better Care Reconciliation Act of 2017.  [Times file photo]
  5. Amid U.S. real estate buying binge by foreign investors, Florida remains first choice

    Real Estate

    Foreign investment in U.S. residential real estate recently skyrocketed to a new high with nearly half of all foreign sales happening in Florida, California and Texas.

    A National Association of Realtors annual survey found record volume and activity by foreign buyers of U.S. real estate. Florida had the highest foreign investment activity, followed by California and Texas. [National Association of Realtors]