Dismal jobs data shakes Asian markets
Monday, September 5, 2011
WASHINGTON (AP) — The dismal U.S. job market, which has intensified fears of another recession, may be even worse than the unemployment numbers suggest.
The shockwaves from the Labor Department report on Friday that employers stopped hiring in August have rippled around the world, sparking a steep retreat in Asian stock markets. The lack of hiring in the U.S. last month surprised investors — economists were expecting 93,000 jobs to be added. Previously reported hiring figures for June and July were revised lower.
The jobs picture may even be worse than the 9.1 percent unemployment rate suggests, because America's 14 million unemployed must also compete with 8.8 million other people not counted as unemployed — part-timers who want full-time work.
When consumer demand picks up, companies will likely boost the hours of their part-timers before they add jobs, economists say. It means they have room to expand without hiring.
Fears that the U.S. economy may be stuck in neutral, or worse, slammed Asian stocks. Japan's benchmark Nikkei 225 index fell 2 percent in midday trading to 8,771.90. Hong Kong's Hang Seng was 2.2 percent lower at 19,775.01 and South Korea's Kospi Composite Index tumbled 4 percent to 1,793.13.
"The problem is that there simply hasn't been any meaningful jobs growth, which is precisely why markets are so worried about slipping back into recession," said Ben Potter of IG Markets in Melbourne, Australia.
"The authorities have thrown a lot of stimulus at the problem and to date, it's basically done nothing," Potter said. Markets are realizing "that there probably isn't a lot more authorities can do."
The unemployed will face another source of competition once the economy improves: Roughly 2.6 million people who aren't counted as unemployed because they've stopped looking for work. Once they start looking again, they'll be classified as unemployed. And the unemployment rate could rise.
Intensified competition for jobs means unemployment could exceed its historic norm of 5 percent to 6 percent for several more years. The nonpartisan Congressional Budget Office expects the rate to exceed 8 percent until 2014. The White House predicts it will average 9 percent next year, when President Barack Obama runs for re-election.
The jobs crisis has led Obama to schedule a major speech Thursday night to propose steps to stimulate hiring. Republican presidential candidates will likely confront the issue in a debate the night before.
The back-to-back events will come days after the government said employers added zero net jobs in August. The monthly jobs report, arriving three days before Labor Day, was the weakest since September 2010. Reaction from U.S. markets won't be evident until Tuesday, when trading resumes after the holiday.
Combined, the 14 million officially unemployed; the "underemployed" part-timers who want full-time work; and "discouraged" people who have stopped looking make up 16.2 percent of working-age Americans.
The Labor Department compiles the figure to assess how many people want full-time work and can't find it — a number the unemployment rate alone doesn't capture.
In a healthy economy, this broader measure of unemployment stays below 10 percent. Since the Great Recession officially ended more than two years ago, the rate has been 15 percent or more.
The proportion of the work force made up of the frustrated part-timers has risen faster than unemployment has since the recession began in December 2007.
That's because many companies slashed workers' hours after the recession hit. If they restored all those lost hours to their existing staff, they'd add enough hours to equal about 950,000 full-time jobs, according to calculations by Heidi Shierholz, an economist at the Economic Policy Institute.
That's without having to hire a single employee.
No one expects every company to delay hiring until every part-timer is working full time. But economists expect job growth to stay weak for two or three more years in part because of how many frustrated part-timers want to work full time.
And because employers are still reluctant to increase hours for part-timers, "hiring is really a long way off," says Christine Riordan, a policy analyst at the National Employment Law Project. In August, employees of private companies worked fewer hours than in July.
Some groups are disproportionately represented among the broader category of unemployment that includes underemployed and discouraged workers. More than 26 percent of African Americans, for example, and nearly 22 percent of Hispanics are in this category. The figure for whites is less than 15 percent. Women are more likely than men to be in this group.
Among the Americans frustrated with part-time work is Ryan McGrath, 26. In October, he returned from managing a hotel project in Uruguay. He's been unable to find full-time work. So he's been freelancing as a website designer for small businesses in the Chicago area.
Some weeks he's busy and making money. Other times he struggles. He's living at home, and sometimes he has to borrow $50 from his father to pay bills. He's applied for "a million jobs."
"You go to all these interviews for entry-level positions, and you lose out every time," he says.
Nationally, 4.5 unemployed people, on average, are competing for each job opening. In a healthy economy, the average is about two per opening.
If work-force dropouts had been counted as unemployed, August's unemployment rate would have been 10.6 percent instead of 9.1 percent.
The Labor Department's report relies on data collected from surveys of households and businesses in the second week of August. That's right after Standard & Poor's removed the country's AAA credit rating and fears mounted that Europe's banking crisis could spread to the U.S. Television screens were filled with images of riots in London.
"I'm not surprised that businesses weren't doing too much hiring in that environment," Jeff Kleintop, chief market strategist at LPL Financial.
AP Business Writer Pamela Sampson contributed from Bangkok.
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