Employment Stagnates in August

UPDATE: Stocks plunged more than 2 percent on Friday and Treasuries rose after the Labor Department released data showing there was zero job growth in August. Earlier in the week, stocks had risen a bit on expectations that the Federal Reserve would issue new stimulus. But the jobs report made it clear "the Fed alone cannot address the economy's deep problems," notes Reuters. "The problem is that rates have been low for three years now and that isn’t spurring people to buy,” an economist tells Bloomberg. “Companies won’t hire unless demand is there. The Fed can lower the cost of credit, but it can't force companies to create jobs.”

POST 9:23 a.m.: The bad signs for the U.S. economy keep mounting and even those with low expectations are being disappointed. No one expected fantastic news from the August employment report. But the fact that job growth virtually stagnated last month certainly came as a surprise and put even more pressure on the Fed to increase stimulus, notes Reuters, particularly since the economy added fewer jobs in July than initially believed. The unemployment rate remained flat at 9.1 percent, as expected.

Payrolls did not change from last month, meaning the Departmen of Labor data had its weakest reading since September 2010. The median forecast in a Bloomberg News survey predicted a rise of 65,000 while economists surveyed by Dow Jones expected payrolls would rise by 80,000, notes the Wall Street Journal. The private sector added a mere 17,000 jobs while the government continued to shed jobs for the tenth month in a row. Part of the reason why the private sector reported its worst numbers since February 2010 had to do with the Verizon strike. As if the jobs numbers weren’t bad enough, Friday’s report also showed that average hourly earnings dropped by $0.03.

On the upside though, the numbers are unlikely to be seen as a sign of a recession since “layoffs are not rising that much,” writes Reuters. Still, unless job growth speeds up it could take more than four years to return to pre-recession employment levels. “We do not expect the economy to slump, but rather to slouch and stagger,” one analyst said. Friday’s numbers clearly increase expectations for President Barack Obama’s speech on how he plans to boost the jobs market next Thursday. Indeed, economists say that part of the reason for the stagnation has to do with increased uncertainty over where the economy is heading, “saying political deadlock was in effect creating economic paralysis,” writes the New York Times.