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. Law firm's Russia ties prove nothing about Trump

    Business

    The statement

    "Law firm @POTUS used to show he has no ties to Russia was named Russia Law Firm of the Year for their extensive ties to Russia. Unreal."

    Sen. Chris Murphy, D-Conn., stands during a media availability on Capitol Hill, Monday, June 20, 2016 in Washington. A divided Senate blocked rival election-year plans to curb guns on Monday, eight days after the horror of Orlando's mass shooting intensified pressure on lawmakers to act but knotted them in gridlock anyway — even over restricting firearms for terrorists. (AP Photo/Alex Brandon)
  2. Pasco county lawyer disbarred for taking woman's money

    Real Estate

    NEW PORT RICHEY — The Florida Supreme Court on Thursday disbarred Pasco County attorney and former congressional candidate Constantine Kalogianis.

    The Florida Supreme Court on Thursday disbarred Pasco County attorney and former congressional candidate Constantine Kalogianis. 
[2016 booking photo via Pasco County Sheriff's Office]
  3. Rick Scott signs package of tax breaks

    State Roundup

    TALLAHASSEE — Gov. Rick Scott signed a tax cut package Thursday that — while vastly scaled back from what he wanted — eliminates the so-called "tampon tax" and offers tax holidays for back-to-school shoppers and Floridians preparing for hurricane season.

    Florida Governor Rick Scott signed a tax cut package that will cost state coffers $91.6 million during the upcoming year. [Joe Raedle | Getty Images]
  4. FBI probes fraudster's alleged church scam following Tampa Bay Times report

    Real Estate

    PLANT CITY — Once again, the FBI is investigating felon fraudster Victor Thomas Clavizzao.

    The FBI is investigating convicted mortgage fraudster Victor Thomas Clavizzao on new allegations following a Tampa Bay Times report.
[TImes file photo]

  5. Tampa Bay is ground-zero for assignment of benefits cases over broken auto glass

    Banking

    When Rachel Thorpe tried to renew her auto insurance last year for her Toyta RAV4, she was stunned to see her monthly premium had nearly doubled to $600. The Sarasota driver was baffled since her only recent claim was over a broken windshield.

    Auto glass lawsuits filed by a third party (through what's known as assignment of benefits) are skyrocketing in Tampa Bay.
[Times file photo]