JIM LEHRER: The U.S. economy hit a wall in August: no job growth and no improvement in the jobless rate.
Ray Suarez has our story.
RAY SUAREZ: The numbers released today by the Labor Department constitute the weakest jobs report in a year. No net jobs were added in August, and unemployment stayed stuck at 9.1 percent. Those calculations included 45,000 Verizon employees who were on strike and 23,000 Minnesota state employees affected by a partial government shutdown.
To make matters worse, employment figures for June and July were revised down to show 58,000 fewer jobs added.
Joining us to discuss today’s report is Mark Zandi, chief economist at Moody’s Analytics.
And, Mark, what does it is a about the state of the job market that, instead of just merely slowing, job growth stopped?
MARK ZANDI, Moody’s Analytics: Yes, well, it indicates that the economy is perilously close to recession, that — you know, an economy that is not creating jobs can’t sustain that for very long.
Consumers are going to start pulling back, and that’s going to force businesses to start laying off workers. And that’s a downturn. So we need to see businesses start hiring again. Otherwise, we will have that dreaded double dip.
RAY SUAREZ: In addition to that flat number out today, the last two months had to be revised downward, as we mentioned. Does that mean things were even worse than we realized?
MARK ZANDI: Yes, I think it’s very clear that, this summer, we have pretty much stalled out, no job growth at all. And it’s really quite a significant change. If you go back to the beginning of the year, we were creating a couple hundred thousand jobs per month.
The surge in energy prices, the Japanese quake effects on the manufacturing base really hurt. And, of course, more recently, the spectacle in Washington over the debt ceiling, the S&P downgrade, I think, has completely undermined confidence. And businesspeople have just literally frozen. They have stopped hiring.
RAY SUAREZ: What has the impact of job — excuse me — government spending reductions been to the overall labor market?
MARK ZANDI: Yes, good question, a very serious weight on the job market.
The government, state, local, federal, is now laying off about 50,000 jobs per month. So, you know, you can kind of do the arithmetic. Those are pretty significant job losses. I am hopeful that we’re seeing the worst of it right now. Many states are grappling with the end of some fiscal stimulus money.
And they need to balance their budgets, and thus the cutting at the current time. But, nonetheless, no matter how you look at it, we have got some pretty significant job cuts to come in, in the state and local sector over the next year, 18 months.
RAY SUAREZ: Over the months, as we talk to people like you to sift these numbers, we sometimes look for bright spots. Are there sectors that had been contributing to job growth that are either stalled out or uncertain?
MARK ZANDI: Yes, manufacturing would be a good example of that.
The manufacturing sector had been a key source of job growth earlier in the year. But, as I mentioned, the Japanese quake was really very disruptive, particularly to the auto industry and auto-related manufacturing. And, more recently, we’re seeing a slowdown in global economic growth, in Europe, obviously, and in Asia. And that’s beginning to affect our exports.
And, of course, a lot of manufacturers export what they produce. And now they’re starting to cut back as well. So that’s one sector that has gone from adding jobs to laying off workers last month.
RAY SUAREZ: What role does sentiment play in all of this? Could it be making an already fragile economy seem even worse?
MARK ZANDI: You know, Ray, I think that’s key. I think businesspeople are just shell-shocked, like all of us. We have been through a lot.
The recession was very severe. Our collective psyche was already pretty fragile. And I think what we went through late July, early August in Washington around the debt ceiling, the S&P downgrade, the turmoil in Europe, in our stock market, I think that just eviscerated confidence.
And businesspeople need to feel confident before they go out and expand their business, invest and hire. And they have stopped doing that. So confidence is very, very important at this point.
RAY SUAREZ: Well, let’s talk about confidence a little more, because, yesterday, almost as if to get people ready for the blow, the White House forecast that the unemployment rate wasn’t going to come down below 9 percent even through much of next year.
MARK ZANDI: Yes, I think that’s realistic.
I mean, I think, no matter how you look at it, this is going to be a long haul. And under even the most optimistic of forecasts — and I’m among the most optimistic economists out there — it’s not going to be until 2015, 2016, maybe even 2017, before we get back to an unemployment rate that I think everyone would feel really comfortable with.
RAY SUAREZ: Well, you would have to add, if the numbers are right, over 350,000 jobs a month for years into the future just to get us back to where we once were. And that isn’t in the cards, is it?
MARK ZANDI: Not in the very near term.
But let me just provide a little ray of hope here. And that is, you know, while businesses have stopped hiring, they have not started laying off workers in a big way. I mean, I think businesspeople did that during the recession. They’re very comfortable with their current work force. Most businesses, particularly big companies, are very profitable. Their balance sheets are very strong. They have done a very good job of reducing debt.
They really don’t want to pull back here. And if policy-makers can step up, do the right thing over the next couple, three months, I think we will regain — they will regain confidence, businesspeople will regain confidence and they will start hiring again and the economy will start to move forward, and we will avoid that recession.
That’s what I am counting on. But we need to see that pretty quickly.
RAY SUAREZ: One of the most striking and frightening pieces of data to come out today was a black unemployment rate nearly twice, fully twice the national average.
How does that happen? Is it because of where black workers live in the country, the industries they are concentrated in? What’s driving that big, big number?
MARK ZANDI: Yes, you are absolutely right. Certain minority groups have been completely nailed in the recession, the African-American, Hispanic groups very, very hard hit.
If you look at the job numbers, the groups that have been hit hardest are those with lesser skills and education. If you don’t have a college degree, then this job market has been particularly tough. It’s tough for everybody, including those with Ph.D.s. But for people with less than a high school degree, a high school degree, less than a college education, it’s been — it’s particularly hard.
And, you know, I think that’s going to be the case for a long time to come.
RAY SUAREZ: Mark Zandi, thanks for joining us.
MARK ZANDI: Thank you.