U.S. unemployment rate declines; economy adds jobs in education, manufacturing

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The economy was already weak and not getting stronger in September, the month that led up to the federal government shutdown.

The U.S. Bureau of Labor Statistics reported Tuesday that unemployment dropped to 7.2 percent in September, slightly better than the 7.3 percent rate of August. However, the number of new jobs created, at 148,000, was below the average monthly pace of 185,000 jobs created over the previous 12 months.

That led economists to predict that the report for October, which will reflect the partial federal government shutdown during the first 16 days of the month, will be worse because of the ripple effect from turning off the spigot of government spending.

Gus Faucher, an economist at PNC Financial Services Group, Downtown, said the weak employment report will likely have little effect on the actions of the Federal Reserve board, which has been using purchases of government bonds to help stimulate the economy. Instead, the government shutdown is more likely to have been a deterrent to the Federal Reserve cutting back those purchases, an action that has come to be known as "The Taper."

The jobless report improved the mood on Wall Street, which rose on the news. The Dow Jones industrial average ended the day at 15,467.66, up 75.46 points or 0.49 percent; Standard & Poor's 500 Index closed at 1,754.67, up 10.01 or 0.57 percent; and the Nasdaq rose to 3,929.57, up 9.52 points or 0.24 percent.

Mr. Faucher said the upshot of the unemployment report was that "the labor market in the summer and early fall of 2013 was adding jobs, but still at a disappointing pace." The economy is short by 1.8 million jobs of its prerecession peak, he noted. Meanwhile, income growth also remained weak.

There was some good news in the Bureau of Labor Statistics report. Mr. Faucher said an increase of 20,000 construction jobs was a positive sign, particularly since the growth occurred across the board in residential, commercial and civil engineering work.

Doug Handler, an economist at IHS Global Insight in Lexington, Mass., noted job growth was evenly spread across employment sectors, but added that the most recent damage to the economy isn't reflected in this report, which was based on information obtained before the shutdown.

The impact of the Washington, D.C., showdown that sent thousands of government workers home should be available in next month's jobs report and upcoming economic reports. Mr. Handler had been predicting that the nation's gross domestic product would be about 2.2 percent without the shutdown, but he reduced his estimate to 1.6 percent for the fourth quarter instead.

"It's noticeable, measurable and survivable," Mr. Handler said about the economic hit from the government shutdown. "I think it's a punch we can take and move on."

Factoring out the effects of the government shutdown immediately after these data were collected, the September report was fairly bland, he said.

Jason Furman, chairman of the White House's Council of Economic Advisers, noted that while school employment was up by 9,500 in September over August and up by 56,400 over the last three months, employment in local education still off 291,700 from its peak in July 2008.

"Given a growing student population, this understates the teacher and education jobs gap," he said in his report on the economy.


Ann Belser: abelser@post-gazette.com or 412-263-1699. First Published October 22, 2013 9:03 AM

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