Asia Slump Trips Up U.S. Job Growth
Offering fresh evidence of economic trouble at home, the Labor Department said Friday that the nation’s vaunted job-creation machine ground almost to a halt during September and that the unemployment rate rose to 4.6%, with the Asian slump cutting into sales by U.S. manufacturers.
Worried members of Congress’ Joint Economic Committee, ranging from conservative Republicans to liberal Democrats, responded to the news by demanding that the Federal Reserve Board cut interest rates immediately to forestall a full-fledged recession.
Job uncertainty takes a toll on consumer confidence, which recently began to decline nationally. That often leads to a falloff in consumer spending, the main engine of the nation’s economy.
The latest employment numbers were disclosed as President Clinton, warning again that the fast-deteriorating global economy poses a growing threat to the United States, stepped up efforts to organize further international aid for battered Asian economies. He proposed an unspecified “new mechanism” within the International Monetary Fund to limit the financial turmoil.
The September jobless rate climbed only slightly from 4.5% during August, but the more significant number was 69,000, the monthly increase in the number of people added to payrolls.
That was anemic in comparison with July, when jobs jumped by a revised 270,000, and August, when employment surged by a revised 160,000. September was the worst month for the nation’s job-generating machine since the blizzard-plagued month of January 1996, when employment fell by 48,000.
The September report, “if not a shocker, is certainly an attention grabber,” said Martin Regalia, chief economist of the U.S. Chamber of Commerce. “The economy is clearly slipping, and the question is, ‘How much will it slip, and can we stop it?’ ”
The Fed’s decision Tuesday to trim interest rates by 0.25% was far too modest, members of the joint committee insisted. They want lower rates to encourage borrowing and spending by consumers and businesses.
The Fed should “send an important signal to the U.S. and the world” by acting immediately to cut interest rates further, said Rep. Jim Saxton (R-N.J.), the committee chairman.
His colleagues, who rarely find themselves on the same side of a vote, sang the same political song.
Rates “not only can but must go down,” proclaimed Rep. Maurice D. Hinchey (D-N.Y.), a liberal.
The Fed “underplayed its hand and could have done a lot more to strengthen financial markets,” agreed Rep. Jim McCrery (R-La.), a conservative.
In reducing rates a quarter of a point, the Fed said it was balancing the need to stimulate growth against the threat of inflation. Economists expect further, gradual rate reductions over the next year.
The earliest economic victims in this country from the Asian turmoil are workers at U.S. companies that produce industrial machinery--where jobs were down by 8,000 in September--and electronic equipment, where employment was down by 7,000, Bureau of Labor Statistics Commissioner Katherine G. Abraham told the joint committee.
“Together, these two trade-sensitive industries accounted for nearly 40% of total factory job loss since March,” Abraham said. Those losses have totaled 152,000 jobs.
Because Asian economies are depressed, those countries are buying less equipment from the U.S.
At the same time, the foreign companies competing with U.S. producers can sell more in this market because weakened currencies have made their products cheaper compared with U.S.-made goods.
“We are finally being impacted in palpable ways by the global economic crisis,” Hinchey said.
Other business sectors also turned in discouraging employment reports for September.
Construction industry employment, which had been growing at a substantial 24,000 jobs monthly for the 12 months through August, abruptly reversed course last month and fell by 20,000 jobs. This is disturbing news when considered alongside the reports of steady declines in manufacturing. And the service sector, the driving force of the economy, also offered discouraging figures, with an “unusually small increase” of 24,000 jobs last month.
The committee members argued that because inflation is negligible, the Fed can lower interest rates without fear of stimulating a round of price increases.
Average earnings rose a scant 1 cent to $12.86 an hour in September, compared with a gain of 6 cents in August. There are “no signs of increasing inflation expectations,” Saxton said.
The Federal Reserve’s policy-making body, the Open Market Committee, doesn’t have to wait until its next formal meeting Nov. 17 to take action to trim interest rates, according to Fed critics.
If convinced they need to act, the committee members could simply hold a conference call to order a change in policy.
The nation’s total employment reached 131.8 million last month, with 6.3 million people out of work.
The jobless rates among different groups last month were: whites, 3.9%, down from 4%; blacks, 9.2%, up from 9%; and Latinos, 7.4%, down from 7.5%.
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Number of New Jobs
Job growth in September was far weaker than in July.
July: 270,000
Aug.: 160,000
Sept.: 69,000
Source: Department of Labor
