Job growth stalls, fuels recession fears

U.S. employment growth ground to a halt in August, reviving recession fears and piling pressure on both President Barack Obama and the Federal Reserve to provide more stimulus to aid the frail economy.

For the first time in nearly a year the economy failed to create new jobs on a net basis according to the Labor Department's monthly nonfarm payrolls survey on Friday.

Economists had expected nonfarm employment to rise 75,000 last month but they cautioned against viewing the data as a surefire sign of recession.

A worsening debt crisis in Europe and an acrimonious political fight over the U.S. government budget and debt, which led Standard & Poor's to strip the country of its AAA credit rating, ignited a massive stock market sell-off last month and sent business and consumer confidence tumbling.

"The economy is struggling against stiff headwinds, which appear to have intensified in recent months," said Millan Mulraine, senior macro strategist at TD Securities in New York. "While it has clearly not fallen off the cliff, there is little to suggest it is anywhere close to regaining its momentum."
Investors fled riskier assets on the news, sending stocks tumbling, pushing up the price of gold, and lowering U.S. Treasury bond yields.

Employment was dampened by 45,000 striking workers at Verizon Communications. Those workers have since returned to work and will be counted as on the payroll in September.

But even taking that into account the report was largely bleak. The unemployment rate, however, held at 9.1 percent as a survey of households found both job growth and, for the first time in a year, an expanding labor force.

With the jobless rate stuck above 9.0 percent and confidence collapsing, President Barack Obama faces pressure to come up with ways to spur job creation. The health of the labor market could determine whether he wins re-election next year.

Obama will lay out a new jobs plan in a speech to the nation on Thursday, and White House advisers said the data underscored a need for action.

"He will be very specific about what we can do that can have a meaningful impact on job growth in the economy right away," Gene Sperling, a top economic adviser to Obama, told Reuters Insider.

Obama on Friday withdrew new rules to limit smog pollution that businesses had argued would kill jobs and cost them billions of dollars.

The Republican speaker of the House of Representatives, John Boehner, said in a statement it was time for political cooperation "to end the uncertainty facing families and small businesses, and create a better environment for long-term economic growth."

But speaking later to reporters in Ohio, Boehner struck a combative tone toward the White House and Senate Democrats. "They want to push for the same kind of agenda -- more stimulus spending and short-term gimmicks, higher taxes, more regulations. We've seen more of this before and it has failed."

EYES ON THE FED

Despite massive cash injections by both the government and the Fed, sustainable job growth has eluded the economy.More...