WASHINGTON — The job market weakened in September amid a slowdown in key growth engines such as healthcare and leisure — a worrisome sign given that the employment picture probably worsened this month with the partial federal government shutdown.
Employers last month added a modest 148,000 net new jobs, the Labor Department said Tuesday. That was down from an upwardly revised job growth of 193,000 in August, and well below analysts' forecasts for about 180,000 new jobs in September.
The unemployment rate last month dropped a notch, to a five-year low of 7.2%, but that was partly the result of workers leaving the labor market.
The disappointing report, delayed 2½ weeks by the government shutdown that ended last Thursday, nonetheless was met with approval on Wall Street. Stocks rose moderately as investors and analysts alike agreed that the lackluster report would give the Federal Reserve more reason to delay a cutback in its massive bond-buying stimulus, possibly until as late as next March.
"It puts the kibosh on any Fed tapering in 2013," said Mark Vitner, a senior economist at Wells Fargo.
But for Main Street, there wasn't much to cheer in the latest report. Vitner said the job tally for September was inflated by a one-time burst of hiring of bus drivers and teachers in the transportation sector and among state and local governments.
Overall, he said, "the report showed the economy had less momentum going into the government shutdown" than people believed — or had hoped for.
With the September data and small revisions to the payroll numbers for July and August, the economy added on average 143,000 jobs a month in the third quarter.
That pace is more than enough to keep up with population growth and new job entrants, but too slow to absorb at a satisfactory rate many of the 11.3 million officially unemployed or to help the nearly 8 million part-time workers who want more hours.
Job growth averaged 207,000 a month in the first quarter and 182,000 in the second quarter this year. Analysts had predicted a return to stronger job growth in September, based partly on low jobless claims and other surveys suggesting a pick-up in activity.
But the weaker growth reflects an economy that is expanding at a sluggish rate, weighed down by federal spending cuts under the so-called sequester, weak global demand and lingering constraints in borrowing and spending from the Great Recession — not to mention uncertainty over the federal budget.
"The trend is in the wrong direction," Robert B. Reich, public policy professor at UC Berkeley, said of job growth.
Like most experts, Reich expects the employment data for October, set for release Nov. 8, to look even worse than last month's because that report will incorporate some of the effects of the 16-day government shutdown.
A White House analysis, released Tuesday after the jobs report was issued, estimated that roughly 120,000 fewer jobs were created than expected in the first 12 days of October. Along with hurting job creation, early data indicate that economic output, sales growth and consumer spending were all down in the first part of October, according to the analysis by the Council of Economic Advisers.
"What we did in October was a self-inflicted wound," said Jason Furman, chairman of the council. Furman said the final tally could change — "and could potentially get worse."
Apart from the shutdown and its possible effect on hiring, the latest report showed that manufacturing was flat and the once-booming leisure sector lost 13,000 jobs over the month. About 7,000 of those jobs came at restaurants, which had averaged growth of about 25,000 a month this year.
The healthcare industry added just 6,800 jobs in September, about one-third of its monthly average this year. Despite the expectation that the healthcare law will increase the number of people insured — and thus the potential patient pool — experts said they don't see a huge resurgence of payroll growth, especially at hospitals, which are facing reduced reimbursements.
"You need people to staff the beds for sure, but the wild card here is what I think is a cultural shift in the way hospitals operate and an extreme, aggressive surge for cost-cutting," said Paul Hughes-Cromwick, a senior health economist at Altarum Institute in Ann Arbor, Mich. "They are radically taking cost out of production."
Earlier signs of slow economic growth and an uncertain employment outlook had prompted the Fed at its September meeting to delay a pullback of its $85-billion-a-month bond buying. The purchases are aimed at lowering long-term interest rates and stimulating investment and spending.
Fed policymakers have questioned the benefits of continuing the stimulus, but most have been hesitant to make any changes until the job market is on firmer footing. Some Fed officials have said they would like to see the economy producing job growth of about 200,000 a month.
The Fed is scheduled to meet again Tuesday and Wednesday, but officials are highly unlikely to make any substantive change in policy. And now many analysts are backing away from their previous forecast that the central bank would decide to dial back the stimulus at its final meeting of the year in mid-December.
"If they're looking for reasons to taper, there aren't many of them," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago. "I would be hard-pressed to see the Fed take its foot off the pedal. This could delay it until March."
At the very least, Fed policymakers may be reluctant to act this year because the government shutdown disrupted the collection and flow of vital economic statistics. Analysts said it may not be until December before officials can properly assess the underlying trends in the economy.
The unemployment rate, which has inched down from 7.9% at the start of this year, partly because many people have dropped out of the job market, is likely to show an increase in October because hundreds of thousands of furloughed federal employees will be counted as unemployed in the survey that measures the jobless figures.
Yet because the furloughed workers will be getting back pay for the time not worked, their jobs will be tallied in the separate Labor Department survey that tracks monthly job growth.
"They're going to have a hard time reading the tea leaves because we're not going to get clean data until December," said Vitner of Wells Fargo.
Tuesday's jobs report showed that the construction industry added a solid 20,000 jobs in September, after a five-month hiatus of little or no growth, and that increase came partly from the housing recovery.
With the government shutdown, however, there's likely to be another pause in job growth for October, followed by a rebound as federal activity that was temporarily halted comes back on line, said Ken Simonson, chief economist at Associated General Contractors of America.
What happens in December and next year isn't clear, but Simonson worried that the spending cutbacks in the sequester will continue to pinch investment and hiring in the industry.
"I'm not confident," he said. "I think the sequester will be a problem for growth in 2014."
Times staff writer Kathleen Hennessey contributed to this report.