Job Troubles Cast Shadow Over Growth
By Pedro Nicolaci da Costa
NEW YORK (Reuters) - The future looks increasingly dim for U.S. economic growth as high oil prices, spotty consumer demand and fears of terrorism prevent companies from hiring new workers, analysts said on Friday.
From behind their desks in New York and Washington, analysts and policy-makers had forecast that a June slowdown in consumption was a glitch in an otherwise sound recovery.
But a meager increase in employment for July points to a very different reality, suggesting a slowdown in the world's largest economy is much more pervasive.
"Everyone and their brother was saying the soft patch would soon dissipate and that the economy would soon reaccelerate," said Lakshman Achuthan, managing director at the Economic Cycle Research Institute, an independent research firm in New York.
"This jobs report clearly undermines that theory."
U.S. employers added only 32,000 workers to payrolls in July as consumers, who can no longer rely on extra cash from tax rebates, were already growing reluctant to spend.
The data dealt a serious blow to Federal Reserve (news - web sites) Chairman Alan Greenspan (news - web sites)'s contention the economy had entered a period of self-sustaining expansion that would allow the central bank to gradually raise interest rates to a more balanced level.
Now, not only is the path for rates unclear, but also the economy's ability to maintain healthy growth is in question.
"This is not the kind of robust job growth needed for a sustained, strong expansion of the economy," said Lee Price, research director at the Economic Policy Institute.