Read article HERE
Saturday, September 17, 2011
Bills come due for loans to pay jobless
DETROIT — States that borrowed billions of dollars from Washington to cover skyrocketing unemployment payouts during the recession now are cutting benefits, adding fees and, in some cases, increasing taxes on employers to raise the cash needed to repay the loans.
“This is not good news and the timing is terrible,” says Doug Roberts, a former Michigan state treasurer who leads Michigan State University’s Institute for Public Policy and Social Research.
Michigan is one of more than two dozen cash-strapped states facing looming deadlines to pay back almost $40 billion borrowed from the federal government. California, which has the largest outstanding balance, must repay some $8.4 billion.
To pay back the loans, some states are cutting benefits.
According to a new report from the Washington-based National Employment Law Project, six states have reduced the amount of the average unemployment check and the number of weeks someone can draw assistance in order to address insolvent trust funds.
In Florida, a new state law ties benefits to the health of the economy. As unemployment drops, the number of weeks a person can draw an unemployment check drops. Under the new rules, benefits could be cut to as few as 12 weeks — less than half the 26 weeks available in most states.
The change will save Florida an expected $100 million or more a year, helping the state make payments on its own $1.5 billion federal loan.
Some states have tightened eligibility requirements and enacted surcharges on employer tax bills — putting more pressure on businesses at just the moment the Obama administration is urging the private sector to create jobs.
Michigan, which has the nation’s third-highest jobless rate and owes the federal government $3.1 billion in unemployment loans, has a new “solvency tax” on employers.
“The most important thing the federal government and states can do is adopting policies that get people employed, decreasing the need for people to pull on the unemployment insurance,” Mr. Roberts said.
Businesses, Mr. Roberts said, are still trying to recover from the December 2007 to June 2009 “Great Recession.”
“Now we’re telling employers who are trying to hire people we are going to hit you with a higher tax because you have a history of laying people off. It’s discouraging people who want to come into states. A company looks at a state and says that’s a big problem here, and it might spread to me,” he said.
Michigan plans to make its $106 million to $108 million payment due Sept. 30 by drawing up to $41 million from the state’s general fund. The rest will come from the solvency tax on Michigan employers that is expected to generate $47 million. Another $20 million will come from an unemployment penalty and interest account, according to Steve Arwood, director of the Michigan Unemployment Insurance Agency.
An estimated 20 percent of Michigan employers will be affected by the solvency tax, which is triggered when a business pays less into the unemployment compensation trust fund than the Unemployment Insurance Agency has paid out to its laid-off workers.
Billion-dollar-plus federal bills also are coming due in New York, $2.8 billion; Ohio, $2.6 billion; Illinois and Indiana, $1.8 billion each.
In Indiana, businesses have paid nearly 45 percent more in employer taxes this year, according to the Associated Press, under that state’s plan to fix the bankrupt unemployment insurance fund.
Mark Everson, commissioner of the Indiana Department of Workforce Development, said his state plans to make its $60 million federal loan payment on time.
“It’s true that employers are skittish about hiring at this stage, but I don’t think it’s because of the adjustment in the employment insurance premiums,” Mr. Everson said.
“When I talk to employers, they are more focused on the leadership out of Washington, frankly, not the unemployment insurance piece.”
Indiana, he says, is on track and holding the line, not asking for relief from Washington.
But he acknowledged this emerging debt burden is a mounting problem across the country as states struggle to keep themselves afloat economically in a stubborn jobs climate.
“Some states have had to plug huge budget gaps, and I imagine it’s a tough issue for those who have failed to step up and do a good job of addressing these challenges,” Mr. Everson said. “We think we have done the right thing. Nobody is happy about it, but it’s been accepted as necessary.”
http://m.washingtontimes.com/news/2011/sep/11/bills-come-due-for-loans-to-pay-jobless/?page=2
“This is not good news and the timing is terrible,” says Doug Roberts, a former Michigan state treasurer who leads Michigan State University’s Institute for Public Policy and Social Research.
Michigan is one of more than two dozen cash-strapped states facing looming deadlines to pay back almost $40 billion borrowed from the federal government. California, which has the largest outstanding balance, must repay some $8.4 billion.
To pay back the loans, some states are cutting benefits.
According to a new report from the Washington-based National Employment Law Project, six states have reduced the amount of the average unemployment check and the number of weeks someone can draw assistance in order to address insolvent trust funds.
In Florida, a new state law ties benefits to the health of the economy. As unemployment drops, the number of weeks a person can draw an unemployment check drops. Under the new rules, benefits could be cut to as few as 12 weeks — less than half the 26 weeks available in most states.
The change will save Florida an expected $100 million or more a year, helping the state make payments on its own $1.5 billion federal loan.
Some states have tightened eligibility requirements and enacted surcharges on employer tax bills — putting more pressure on businesses at just the moment the Obama administration is urging the private sector to create jobs.
Michigan, which has the nation’s third-highest jobless rate and owes the federal government $3.1 billion in unemployment loans, has a new “solvency tax” on employers.
“The most important thing the federal government and states can do is adopting policies that get people employed, decreasing the need for people to pull on the unemployment insurance,” Mr. Roberts said.
Businesses, Mr. Roberts said, are still trying to recover from the December 2007 to June 2009 “Great Recession.”
“Now we’re telling employers who are trying to hire people we are going to hit you with a higher tax because you have a history of laying people off. It’s discouraging people who want to come into states. A company looks at a state and says that’s a big problem here, and it might spread to me,” he said.
Michigan plans to make its $106 million to $108 million payment due Sept. 30 by drawing up to $41 million from the state’s general fund. The rest will come from the solvency tax on Michigan employers that is expected to generate $47 million. Another $20 million will come from an unemployment penalty and interest account, according to Steve Arwood, director of the Michigan Unemployment Insurance Agency.
An estimated 20 percent of Michigan employers will be affected by the solvency tax, which is triggered when a business pays less into the unemployment compensation trust fund than the Unemployment Insurance Agency has paid out to its laid-off workers.
Billion-dollar-plus federal bills also are coming due in New York, $2.8 billion; Ohio, $2.6 billion; Illinois and Indiana, $1.8 billion each.
In Indiana, businesses have paid nearly 45 percent more in employer taxes this year, according to the Associated Press, under that state’s plan to fix the bankrupt unemployment insurance fund.
Mark Everson, commissioner of the Indiana Department of Workforce Development, said his state plans to make its $60 million federal loan payment on time.
“It’s true that employers are skittish about hiring at this stage, but I don’t think it’s because of the adjustment in the employment insurance premiums,” Mr. Everson said.
“When I talk to employers, they are more focused on the leadership out of Washington, frankly, not the unemployment insurance piece.”
Indiana, he says, is on track and holding the line, not asking for relief from Washington.
But he acknowledged this emerging debt burden is a mounting problem across the country as states struggle to keep themselves afloat economically in a stubborn jobs climate.
“Some states have had to plug huge budget gaps, and I imagine it’s a tough issue for those who have failed to step up and do a good job of addressing these challenges,” Mr. Everson said. “We think we have done the right thing. Nobody is happy about it, but it’s been accepted as necessary.”
http://m.washingtontimes.com/news/2011/sep/11/bills-come-due-for-loans-to-pay-jobless/?page=2
Monday, September 12, 2011
Rising tax burden driving wealthy from Delaware
The most recent data from the Tax Foundation shows that Delaware is driving out wealthy residents by raising its state and local tax burden.
Every year the Tax Foundation calculates each state-local tax burden as a percentage of the state's per capita income.
Since 2001 Delaware's tax burden has risen from 8.1% (40th lowest among the states) to 9.6% in 2009 (23rd among the states).
Since the research literature shows that over time households vote with their feet, a rising tax burden is a good incentive to leave a state...
I want to read entire article.
Every year the Tax Foundation calculates each state-local tax burden as a percentage of the state's per capita income.
Since 2001 Delaware's tax burden has risen from 8.1% (40th lowest among the states) to 9.6% in 2009 (23rd among the states).
Since the research literature shows that over time households vote with their feet, a rising tax burden is a good incentive to leave a state...
I want to read entire article.
Thursday, September 8, 2011
Working-age poor population highest since '60s
WASHINGTON — Working-age America is the new face of poverty.
Counting adults 18-64 who were laid off in the recent recession as well as single twenty-somethings still looking for jobs, the new working-age poor represent nearly 3 out of 5 poor people — a switch from the early 1970s when children made up the main impoverished group.
While much of the shift in poverty is due to demographic changes — Americans are having fewer children than before — the now-weakened economy and limited government safety net for workers are heightening the effect.
Currently, the ranks of the working-age poor are at the highest level since the 1960s when the war on poverty was launched. When new census figures for 2010 are released next week, analysts expect a continued increase in the overall poverty rate due to persistently high unemployment last year.
If that holds true, it will mark the fourth year in a row of increases in the U.S. poverty rate, which now stands at 14.3 percent, or 43.6 million people.
"There is a lot of discussion about what the aging of the baby boom should mean for spending on Social Security and Medicare. But there is not much discussion about how the wages of workers, especially those with no more than a high school degree, are not rising," said Sheldon Danziger, a University of Michigan public policy professor who specializes in poverty.
"The reality is there are going to be a lot of working poor for the foreseeable future," he said, citing high unemployment and congressional resistance to raising the minimum wage.
The newest poor include Richard Bowden, 53, of southeast Washington, who has been on food stamps off and on the last few years. A maintenance worker, Bowden says he was unable to save much money before losing his job months ago. He no longer works due to hip and back problems and now gets by on about $1,000 a month in disability and other aid.
"At my work, we hadn't gotten a raise in two years, even while the prices of food and clothing kept going up, so I had little left over," Bowden said. "Now, after rent, the utility bill, transportation and other costs, my money is pretty much down to nothing."
"I pray and hope that things get better, but you just don't know," he said.
The poverty figures come at a politically sensitive time for President Barack Obama, after a Labor Department report last Friday showed zero job growth in August. The White House now acknowledges that the unemployment rate, currently at 9.1 percent, will likely average 9 percent through 2012.
Obama is preparing to outline a new plan for creating jobs and stimulating the economy in a prime-time address to Congress on Thursday. The Republican-controlled House has been adamant about requiring spending cuts in return for an increase in the federal debt limit. Suggested cuts have included proposals to raise the eligibility age for future Medicare recipients or to reduce other domestic programs in a way that would disproportionately affect the poor.
According to the latest census data, the share of poor who are ages 18-64 now stands at 56.7 percent, compared to 35.5 percent who are children and 7.9 percent who are 65 and older. The working-age share surpasses a previous high of 55.5 percent first reached in 2004.
Lower-skilled adults ages 18 to 34, in particular, have had the largest jumps in poverty as employers keep or hire older workers for the dwindling jobs available. The declining economic fortunes have caused many unemployed young Americans to double up in housing with parents, friends and loved ones.
In 1966, when the Census Bureau first began tracking the age distribution of the poor, children made up the biggest share of those in poverty, at 43.5 percent. Working-age adults comprised a 38.6 percent share, and Americans 65 and older represented nearly 18 percent.
Douglas Besharov, a University of Maryland public policy professor and former scholar at the conservative American Enterprise Institute, says that expansions of the federal safety net including Social Security retirement and disability payments have been important in reducing poverty.
In 2009, for instance, the Census Bureau estimated that new unemployment benefits — which gave workers up to 99 weeks of payments after a layoff — helped keep 3.3 million people out of poverty. For 2010, Besharov said demographers on average expect an increase in poverty of roughly half a percentage point to nearly 15 percent, depending partly on the impact of unemployment insurance, which did not run out for many people until this year.
The current poverty level was set at $10,956 for one person and $21,954 for a family of four, based on an official government calculation that includes only cash income, before taxes. It excludes capital gains or accumulated wealth, such as home ownership, as well as noncash aid such as food stamps.
Taking noncash aid into account shifts the poverty numbers notably. Next month, the government will release new supplemental poverty numbers for the first time that will factor in food stamps and tax credits — which often benefit out-of-work families with children — but also everyday costs such as commuting that tend to have a bigger impact on working Americans.
Preliminary census estimates released this summer show a decline in child poverty based on the new measure and a jump in the shares of poor who are working age — from 56.7 percent to nearly 60 percent. In all, the child poverty rate decreases from 20.7 percent under the official poverty measure to 17.9 percent, according to estimates. But the senior poverty rate jumps from 8.9 percent to 15.6 percent after including out-of-pocket medical costs, and working-age adults see an increase in poverty from 12.9 percent to 14.9 percent.
Food banks say they see a shift to a new working poor.
"Americans from all walks of life are now finding themselves in need of help for the first time in their lives," said Vicki Escarra, president of Feeding America, a national network of food banks that is based in Chicago. She noted that demand has increased by 46 percent since the recession began in late 2007, with more than 1 in 3 families who get their assistance having one or more adults working.
"The reality is we all know someone who has lost a job or a crisis that has caused financial concern. In fact, some people who used to be donors to our Feeding America food banks are themselves now turning to us for help," she said.
Demographers expect next week's poverty report to show:
A rise in working families who are low income, to nearly 1 in 3. "Low income" is defined as those making less than 200 percent of the poverty threshold, or about $43,000 for a family of four.
Larger numbers of people who are uninsured, due to slightly higher rates of unemployment on average in 2010. Most provisions of the new health care law, which in part expands Medicaid to pick up millions more low-income people, don't take effect until 2014.
Blacks and Hispanics disproportionately hit, based on their higher rates of unemployment.
A possible widening of the income gap between rich and poor, at least by some measures, due partly to last year's stock market rebound while the job market languished.
Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in income inequality, called the outlook for younger adults in the U.S. especially troubling. He pointed to youth discontent in other parts of the world, such as England, where he says high unemployment and widening inequality contributed to recent rioting.
"We risk a new underclass who are not able to support their children, form stable families, buy houses and reach the middle class," Smeeding said.
http://www.msnbc.msn.com/id/44413750/ns/business-us_business/#.Tma4yY4rdac
Counting adults 18-64 who were laid off in the recent recession as well as single twenty-somethings still looking for jobs, the new working-age poor represent nearly 3 out of 5 poor people — a switch from the early 1970s when children made up the main impoverished group.
While much of the shift in poverty is due to demographic changes — Americans are having fewer children than before — the now-weakened economy and limited government safety net for workers are heightening the effect.
Currently, the ranks of the working-age poor are at the highest level since the 1960s when the war on poverty was launched. When new census figures for 2010 are released next week, analysts expect a continued increase in the overall poverty rate due to persistently high unemployment last year.
If that holds true, it will mark the fourth year in a row of increases in the U.S. poverty rate, which now stands at 14.3 percent, or 43.6 million people.
"There is a lot of discussion about what the aging of the baby boom should mean for spending on Social Security and Medicare. But there is not much discussion about how the wages of workers, especially those with no more than a high school degree, are not rising," said Sheldon Danziger, a University of Michigan public policy professor who specializes in poverty.
"The reality is there are going to be a lot of working poor for the foreseeable future," he said, citing high unemployment and congressional resistance to raising the minimum wage.
The newest poor include Richard Bowden, 53, of southeast Washington, who has been on food stamps off and on the last few years. A maintenance worker, Bowden says he was unable to save much money before losing his job months ago. He no longer works due to hip and back problems and now gets by on about $1,000 a month in disability and other aid.
"At my work, we hadn't gotten a raise in two years, even while the prices of food and clothing kept going up, so I had little left over," Bowden said. "Now, after rent, the utility bill, transportation and other costs, my money is pretty much down to nothing."
"I pray and hope that things get better, but you just don't know," he said.
The poverty figures come at a politically sensitive time for President Barack Obama, after a Labor Department report last Friday showed zero job growth in August. The White House now acknowledges that the unemployment rate, currently at 9.1 percent, will likely average 9 percent through 2012.
Obama is preparing to outline a new plan for creating jobs and stimulating the economy in a prime-time address to Congress on Thursday. The Republican-controlled House has been adamant about requiring spending cuts in return for an increase in the federal debt limit. Suggested cuts have included proposals to raise the eligibility age for future Medicare recipients or to reduce other domestic programs in a way that would disproportionately affect the poor.
According to the latest census data, the share of poor who are ages 18-64 now stands at 56.7 percent, compared to 35.5 percent who are children and 7.9 percent who are 65 and older. The working-age share surpasses a previous high of 55.5 percent first reached in 2004.
Lower-skilled adults ages 18 to 34, in particular, have had the largest jumps in poverty as employers keep or hire older workers for the dwindling jobs available. The declining economic fortunes have caused many unemployed young Americans to double up in housing with parents, friends and loved ones.
In 1966, when the Census Bureau first began tracking the age distribution of the poor, children made up the biggest share of those in poverty, at 43.5 percent. Working-age adults comprised a 38.6 percent share, and Americans 65 and older represented nearly 18 percent.
Douglas Besharov, a University of Maryland public policy professor and former scholar at the conservative American Enterprise Institute, says that expansions of the federal safety net including Social Security retirement and disability payments have been important in reducing poverty.
In 2009, for instance, the Census Bureau estimated that new unemployment benefits — which gave workers up to 99 weeks of payments after a layoff — helped keep 3.3 million people out of poverty. For 2010, Besharov said demographers on average expect an increase in poverty of roughly half a percentage point to nearly 15 percent, depending partly on the impact of unemployment insurance, which did not run out for many people until this year.
The current poverty level was set at $10,956 for one person and $21,954 for a family of four, based on an official government calculation that includes only cash income, before taxes. It excludes capital gains or accumulated wealth, such as home ownership, as well as noncash aid such as food stamps.
Taking noncash aid into account shifts the poverty numbers notably. Next month, the government will release new supplemental poverty numbers for the first time that will factor in food stamps and tax credits — which often benefit out-of-work families with children — but also everyday costs such as commuting that tend to have a bigger impact on working Americans.
Preliminary census estimates released this summer show a decline in child poverty based on the new measure and a jump in the shares of poor who are working age — from 56.7 percent to nearly 60 percent. In all, the child poverty rate decreases from 20.7 percent under the official poverty measure to 17.9 percent, according to estimates. But the senior poverty rate jumps from 8.9 percent to 15.6 percent after including out-of-pocket medical costs, and working-age adults see an increase in poverty from 12.9 percent to 14.9 percent.
Food banks say they see a shift to a new working poor.
"Americans from all walks of life are now finding themselves in need of help for the first time in their lives," said Vicki Escarra, president of Feeding America, a national network of food banks that is based in Chicago. She noted that demand has increased by 46 percent since the recession began in late 2007, with more than 1 in 3 families who get their assistance having one or more adults working.
"The reality is we all know someone who has lost a job or a crisis that has caused financial concern. In fact, some people who used to be donors to our Feeding America food banks are themselves now turning to us for help," she said.
Demographers expect next week's poverty report to show:
A rise in working families who are low income, to nearly 1 in 3. "Low income" is defined as those making less than 200 percent of the poverty threshold, or about $43,000 for a family of four.
Larger numbers of people who are uninsured, due to slightly higher rates of unemployment on average in 2010. Most provisions of the new health care law, which in part expands Medicaid to pick up millions more low-income people, don't take effect until 2014.
Blacks and Hispanics disproportionately hit, based on their higher rates of unemployment.
A possible widening of the income gap between rich and poor, at least by some measures, due partly to last year's stock market rebound while the job market languished.
Timothy Smeeding, a University of Wisconsin-Madison professor who specializes in income inequality, called the outlook for younger adults in the U.S. especially troubling. He pointed to youth discontent in other parts of the world, such as England, where he says high unemployment and widening inequality contributed to recent rioting.
"We risk a new underclass who are not able to support their children, form stable families, buy houses and reach the middle class," Smeeding said.
http://www.msnbc.msn.com/id/44413750/ns/business-us_business/#.Tma4yY4rdac
Delaware: A State in Denial
The latest data on state to state migration confirms that folks vote rationally with their feet and that Delaware legislators are in denial about this fact.
Census data shows that two-thirds of the net migrants into Delaware from 2007-09 came from just four states: New Jersey, New York, Pennsylvania and Massachusetts. Not surprisingly, these states have among the highest tax burdens, strong unions, and sluggish economies.
Two-thirds of the net out-migrants from Delaware went to five states: North Carolina, Florida, South Carolina, Kentucky and Tennessee. All the states have comparatively low tax burdens, four are right to work, and these four have higher growth economies...
I want to read the entire article
Dr John E. Stapleford, Director
Center for Economic Policy and Analysis
Caesar Rodney Institute
Census data shows that two-thirds of the net migrants into Delaware from 2007-09 came from just four states: New Jersey, New York, Pennsylvania and Massachusetts. Not surprisingly, these states have among the highest tax burdens, strong unions, and sluggish economies.
Two-thirds of the net out-migrants from Delaware went to five states: North Carolina, Florida, South Carolina, Kentucky and Tennessee. All the states have comparatively low tax burdens, four are right to work, and these four have higher growth economies...
I want to read the entire article
Dr John E. Stapleford, Director
Center for Economic Policy and Analysis
Caesar Rodney Institute
Hiring standstill points to growing recession risk
WASHINGTON (AP) -- Employers added no jobs in August -- an alarming setback for the economy that renewed fears of another recession and raised pressure on Washington to end the hiring standstill.
Worries flared Friday after the release of the worst jobs report since September 2010. Total payrolls were unchanged, the first time since 1945 that the government reported a net job change of zero. The unemployment rate stayed at 9.1 percent.
The dismal news two day before Labor Day sent stocks plunging. The Dow Jones industrial average fell 253 points, or more than 2 percent.
Analysts say the economy cannot continue to expand unless hiring picks up. In the first six months of 2011, growth was measured at an annual rate of 0.7 percent.
Companies are mostly keeping their payrolls intact. They're not laying off many workers. But they're not hiring, either. Without more jobs to fuel consumer spending, economists say another recession would be inevitable. Consumer spending accounts for about 70 percent of economic growth.
Like a wobbling bicycle, "you either reaccelerate or you fall over, said James O'Sullivan, chief economist at MF Global. "Something has to give."
When growth is slow and unemployment high, companies feel little pressure to increase pay and benefits. In August, for instance, hourly wages fell.
And when unemployment is chronically high, even many people who have jobs worry about losing them. So they're less likely to spend.
Eventually, as consumers cut back, corporate sales decline. Companies scale back hiring even more. Weak spending and hiring can feed on each other and edge the economy closer to recession.
When the economy is barely growing, it's also vulnerable to shocks like natural disasters and political upheavals. An economy growing 5 percent a year can absorb more punishment than one growing at 1 percent before it would slip into recession.
Consumer and business confidence was shaken this summer by the political standoff over the federal debt limit, a downgrade of long-term U.S. debt and the financial crisis in Europe. Tumbling stock prices escalated the worries.
Even before it stalled last month, job growth had been sputtering. The economy added 166,000 jobs a month in the January-March quarter, 97,000 a month in the April-June quarter and just 43,000 a month so far in the July-September period.
"Underlying job growth needs to improve immediately in order to avoid a recession," said HSBC economist Ryan Wang.
The dispiriting job numbers for August will heighten the pressure on the Federal Reserve, President Barack Obama and Congress to find ways to stimulate the economy.
So far, the Fed has been reluctant to launch another round of Treasury bond purchases. Its previous bond-buying programs were intended to force down long-term interest rates, encourage borrowing and boost stock prices.
On Thursday, Obama will give a televised speech to a joint session of Congress to introduce a plan for creating jobs and spurring economic growth.
"The importance of job growth cannot be overstated," said Joshua Shapiro, chief U.S. economist at MFR Inc.
The economy needs to add at least 250,000 jobs a month to rapidly bring down the unemployment rate. The rate has been above 9 percent in all but two months since May 2009.
Roughly 14 million Americans are unemployed. An additional 11.4 million are either working part time but want full-time jobs or have given up looking for work and aren't counted as unemployed.
The weakness was underscored by revisions to the jobs data for June and July. Collectively, those figures were lowered to show 58,000 fewer jobs added than previously thought. The downward revisions were all in government jobs.
The average workweek declined in August. Cutbacks by federal, state and local governments have erased 290,000 government jobs this year, including 17,000 in August.
"There is no silver lining in this one," said Steve Blitz, senior economist at ITG Investment Research. "It is difficult to walk away from these numbers without the conclusion that the economy is simply grinding to a halt."
The unemployment rate for black men jumped a full percentage point in August to 18 percent. That's the highest level for that group since March 2010. And unemployment for black people as a whole surged from 15.9 percent to 16.7 percent even as unemployment for white Americans ticked down to 8 percent from 8.1 percent.
Obama has faced doubts within his own party, including black lawmakers who say he hasn't done enough to help chronic unemployment in black communities.
Yet Obama is unlikely to win support for any new stimulus spending from congressional Republicans, who oppose further spending and argue that the president's economic policies have failed. They favor spending cuts and less government regulation.
On Friday, Obama took a step toward winning their support. He directed the Environmental Protection Agency to abandon rules that would have tightened health-based standards for smog. Republicans and some business leaders have said the proposed rules would have cost jobs.
Kurt Karl, chief economist for the Americas at Swiss Re, said the August jobs report "implies a rising probability of recession."
Still, he noted, employment fell for 18 months after the 2001 recession -- and the economy kept chugging along at an annual rate of 2.1 percent over that time.
The economy's 0.7 percent growth rate in the first half of 2011 was the slowest six months of growth since the recession officially ended in June 2009.
Most economists expect growth to improve to about a 2 percent annual rate in the July-September quarter -- though Friday's bleak report may cause some economists to downgrade their forecasts.
Lower gasoline prices have provided some relief to consumers. And factories are revving up again after being interrupted by Japan's earthquake and nuclear crisis.
Before Friday's jobs report, the economy had been showing signs of better health. Consumer spending was strong in August. Auto sales were brisk. Manufacturing expanded. And fewer people applied for unemployment benefits.
Yet even 2 percent growth isn't fast enough to generate many jobs. And the economy remains vulnerable to outside shocks -- a worsening European debt crisis or more political brinkmanship in Washington.
"The economy's perforated at this point," said Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. "Any additional strain on it will tear it apart."
The Obama administration has estimated that unemployment will average about 9 percent next year, when Obama will seek re-election. The rate was 7.8 percent when he took office.
The White House Office of Management and Budget projects overall growth of just 1.7 percent this year.
"The economy continues to stagger," said Sung Won Sohn, economist at California State University Channel Islands. "It wouldn't take much (of a) shock to tip it onto a recession."
http://finance.yahoo.com/news/Hiring-standstill-points-to-apf-4252098583.html?x=0
Worries flared Friday after the release of the worst jobs report since September 2010. Total payrolls were unchanged, the first time since 1945 that the government reported a net job change of zero. The unemployment rate stayed at 9.1 percent.
The dismal news two day before Labor Day sent stocks plunging. The Dow Jones industrial average fell 253 points, or more than 2 percent.
Analysts say the economy cannot continue to expand unless hiring picks up. In the first six months of 2011, growth was measured at an annual rate of 0.7 percent.
Companies are mostly keeping their payrolls intact. They're not laying off many workers. But they're not hiring, either. Without more jobs to fuel consumer spending, economists say another recession would be inevitable. Consumer spending accounts for about 70 percent of economic growth.
Like a wobbling bicycle, "you either reaccelerate or you fall over, said James O'Sullivan, chief economist at MF Global. "Something has to give."
When growth is slow and unemployment high, companies feel little pressure to increase pay and benefits. In August, for instance, hourly wages fell.
And when unemployment is chronically high, even many people who have jobs worry about losing them. So they're less likely to spend.
Eventually, as consumers cut back, corporate sales decline. Companies scale back hiring even more. Weak spending and hiring can feed on each other and edge the economy closer to recession.
When the economy is barely growing, it's also vulnerable to shocks like natural disasters and political upheavals. An economy growing 5 percent a year can absorb more punishment than one growing at 1 percent before it would slip into recession.
Consumer and business confidence was shaken this summer by the political standoff over the federal debt limit, a downgrade of long-term U.S. debt and the financial crisis in Europe. Tumbling stock prices escalated the worries.
Even before it stalled last month, job growth had been sputtering. The economy added 166,000 jobs a month in the January-March quarter, 97,000 a month in the April-June quarter and just 43,000 a month so far in the July-September period.
"Underlying job growth needs to improve immediately in order to avoid a recession," said HSBC economist Ryan Wang.
The dispiriting job numbers for August will heighten the pressure on the Federal Reserve, President Barack Obama and Congress to find ways to stimulate the economy.
So far, the Fed has been reluctant to launch another round of Treasury bond purchases. Its previous bond-buying programs were intended to force down long-term interest rates, encourage borrowing and boost stock prices.
On Thursday, Obama will give a televised speech to a joint session of Congress to introduce a plan for creating jobs and spurring economic growth.
"The importance of job growth cannot be overstated," said Joshua Shapiro, chief U.S. economist at MFR Inc.
The economy needs to add at least 250,000 jobs a month to rapidly bring down the unemployment rate. The rate has been above 9 percent in all but two months since May 2009.
Roughly 14 million Americans are unemployed. An additional 11.4 million are either working part time but want full-time jobs or have given up looking for work and aren't counted as unemployed.
The weakness was underscored by revisions to the jobs data for June and July. Collectively, those figures were lowered to show 58,000 fewer jobs added than previously thought. The downward revisions were all in government jobs.
The average workweek declined in August. Cutbacks by federal, state and local governments have erased 290,000 government jobs this year, including 17,000 in August.
"There is no silver lining in this one," said Steve Blitz, senior economist at ITG Investment Research. "It is difficult to walk away from these numbers without the conclusion that the economy is simply grinding to a halt."
The unemployment rate for black men jumped a full percentage point in August to 18 percent. That's the highest level for that group since March 2010. And unemployment for black people as a whole surged from 15.9 percent to 16.7 percent even as unemployment for white Americans ticked down to 8 percent from 8.1 percent.
Obama has faced doubts within his own party, including black lawmakers who say he hasn't done enough to help chronic unemployment in black communities.
Yet Obama is unlikely to win support for any new stimulus spending from congressional Republicans, who oppose further spending and argue that the president's economic policies have failed. They favor spending cuts and less government regulation.
On Friday, Obama took a step toward winning their support. He directed the Environmental Protection Agency to abandon rules that would have tightened health-based standards for smog. Republicans and some business leaders have said the proposed rules would have cost jobs.
Kurt Karl, chief economist for the Americas at Swiss Re, said the August jobs report "implies a rising probability of recession."
Still, he noted, employment fell for 18 months after the 2001 recession -- and the economy kept chugging along at an annual rate of 2.1 percent over that time.
The economy's 0.7 percent growth rate in the first half of 2011 was the slowest six months of growth since the recession officially ended in June 2009.
Most economists expect growth to improve to about a 2 percent annual rate in the July-September quarter -- though Friday's bleak report may cause some economists to downgrade their forecasts.
Lower gasoline prices have provided some relief to consumers. And factories are revving up again after being interrupted by Japan's earthquake and nuclear crisis.
Before Friday's jobs report, the economy had been showing signs of better health. Consumer spending was strong in August. Auto sales were brisk. Manufacturing expanded. And fewer people applied for unemployment benefits.
Yet even 2 percent growth isn't fast enough to generate many jobs. And the economy remains vulnerable to outside shocks -- a worsening European debt crisis or more political brinkmanship in Washington.
"The economy's perforated at this point," said Sean Snaith, director of the University of Central Florida's Institute for Economic Competitiveness. "Any additional strain on it will tear it apart."
The Obama administration has estimated that unemployment will average about 9 percent next year, when Obama will seek re-election. The rate was 7.8 percent when he took office.
The White House Office of Management and Budget projects overall growth of just 1.7 percent this year.
"The economy continues to stagger," said Sung Won Sohn, economist at California State University Channel Islands. "It wouldn't take much (of a) shock to tip it onto a recession."
http://finance.yahoo.com/news/Hiring-standstill-points-to-apf-4252098583.html?x=0
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