Job-growth streak ends at 4 years
The economy shows more signs of vulnerability, causing jitters.
By HELEN HUNTLEY, Personal Finance Editor
Published September 8, 2007
The economy lost jobs last month for the first time in four years and investors took it as an ominous sign, sending stocks down nearly 2 percent Friday.
Instead of the 110,000 new jobs economists had forecast, the Labor Department reported a net loss of 4,000 jobs for August. Unemployment was unchanged at 4.6 percent. To make matters worse, the government revised the numbers for June and July, reducing the job gains reported earlier.
Does that mean a recession is on the way? Not necessarily. But it does mean the economy is losing steam and becoming more vulnerable to other shocks. And it's become more likely that the Federal Reserve will cut short-term interest rates later this month.
Florida's August numbers won't be available for two more weeks, but they probably will be down from July, said University of Central Florida economist Sean Snaith.
"I expect we'll see some soft numbers, though maybe not overall job loss," he said. Florida is shedding jobs in construction, real estate and mortgage financing, and there may be job losses in related retail sectors, he said.
"The big question nationally as well as in Florida is what is the spilllover going to be?" he said. "How far is this housing contamination going to spread? Will it bring the entire economy down?"
The economy still has a lot going for it, said Scott Brown, senior economist at Raymond James & Associates in St. Petersburg. He noted that businesses generally have good balance sheets and have been funding much of their capital expansion with cash, instead of borrowing. "Credit conditions are pretty good still for credit-worthy consumers and business borrowers."
Florida has seen much stronger job growth than the national average, fueled in part by the housing boom. But growth has slowed and unemployment rose to 3.9 percent in July, up from 3.5 percent in June.
Florida will feel some pain until the inventory of unsold houses declines substantially, said Zoltan Pozsar, senior economist at Economy.com. "Florida is in for a period of substantial housing price declines, well north of 15 percent for the state as a whole," he said. That, in turn, will make it difficult for homeowners to tap their home equity, which will hurt consumer spending, he said.
However, Pozsar stopped short of predicting a recession, saying the key to avoiding one will be the performance of sectors other than housing.
Snaith said he thinks Florida is in a pretty good position on that point. "The diversification of the engines of growth allows me to think things can continue to chug forward as housing propulsion continues to fade away," he said.
The national figures showed job losses in construction, manufacturing and local government. There were gains in health care, restaurants and professional and business services.
While both economists and investment analysts warned not to put too much emphasis on a single month's report, plenty of people were troubled Friday. The Dow Jones Industrial Average fell 249.97 points to close at 13,113.38.
"It is a pretty solid data point that gives people real cause for concern," said money manager James Sonneborn at RegentAtlantic Capital in New Jersey.
Helen Huntley can be reached at firstname.lastname@example.org or (727) 893-8230.
[Last modified September 7, 2007, 23:17:14]
[an error occurred while processing this directive]