Newly elected members of Congress will get a reminder Friday of the economic challenges they face in January: The jobs report for October is expected to show hiring weak and unemployment still high.
The outlook for 2011 isn’t much better.
Economists expect the Labor Department to report that employers added just 60,000 jobs in October, fewer than the 100,000 needed to keep pace with population growth — and far fewer than the 200,000 needed to start returning the 15 million unemployed Americans to work.
As a result, the unemployment rate is expected to remain 9.6 percent for a third straight month.
The jobs report will also likely illustrate why the Federal Reserve felt it needed to announce Wednesday a plan to buy $600 billion in Treasury bonds. Those purchases are intended to lower interest rates on mortgages and other loans and help boost the economy.
Since new members of the House and Senate won’t take office until January, the burden of trying to energize the economy will fall initially on current members. They will meet in a so-called lame-duck session Nov. 15.
Many economists think lawmakers will extend the 2001 and 2003 tax cuts, which are scheduled to expire at the end of this year. Obama had favored letting the tax cuts lapse for the highest-earning 2 percent of taxpayers. But Republicans have pushed to make them permanent for everyone.
On Thursday, White House spokesman Robert Gibbs said Obama would be open to extending the cuts for upper-income earners for one or two years.
The economy is likely to remain sluggish either way, and many economists see unemployment remaining above 9 percent through next year.
“Nobody is expecting rapid economic growth in the near future,” said Zach Pandl, an economist at Nomura Securities. “The economy still has a lot of challenges in front of it.”
That’s why the Federal Reserve wants to spur more borrowing and spending, boost the economy and encourage more hiring.
“The job market remains quite weak,” Fed Chairman Ben Bernanke wrote in a commentary published Thursday in the Washington Post. “A large number of people can find only part-time work, and a substantial fraction of the unemployed have been out of work six months or longer.”
But the Fed’s efforts likely won’t do much to reduce unemployment anytime soon, economists said. That’s partly because many Americans are reducing their debts — and will use the new lower interest rates toward that effort — and don’t want to take out more loans. Or they don’t qualify.
“Consumers are still in balance-sheet repair mode, which is exactly where they should be,” said Tom Porcelli, an economist at RBC Capital Markets.
Other critics fear the Fed’s bond purchases could drive inflation too high over the long term and unleash speculative buying in assets like stocks.
On Thursday, the Labor Department said the number of people seeking jobless benefits jumped sharply last week after two weeks of declines. The increase undermined hope that unemployment claims, after falling four times in the previous five weeks, were on a sustained downward trend that would signal layoffs were slowing and hiring was picking up.
Initial claims for unemployment aid rose by 20,000 to a seasonally adjusted 457,000 for the week ending Oct. 30. Claims have fluctuated around the 450,000 level all year. They would need to drop below 425,000 to signal sustained job gains.
The weekly applications for unemployment benefits are volatile but are considered a real-time snapshot of the job market. They reflect the pace of layoffs and signal whether companies are hiring.
Separately, labor productivity rebounded in the July-September quarter, rising 1.9 percent after falling in the previous quarter.
But even with the decline, productivity, or output per hour worked, is still growing at a much weaker pace than it did last year. That could be a positive sign that companies will have to step up hiring to meet growing demand.
Copyright © 2010 The Associated Press
- Backslide? Applications for jobless aid rise sharply (thegrio.com)
- Applications for jobless aid rise sharply (sfgate.com)
- Payrolls likely grew in October, jobless rate steady (reuters.com)