The uncertainty and weakness that hung over the US job market last month before the government shut down are not going away.
Employers will likely remain slow to hire as long as the economy struggles to accelerate, consumers limit their spending and US Congress keeps putting off a resolution to a budget fight that will resurface early next year.
Just a few months ago, many economists predicted that hiring would pick up by year’s end as the effects of tax increases and government spending cuts that kicked in this year faded.
Last months’s jobs report made clear that hiring is not strengthening: It is slowing.
Employers last month added 148,000 jobs, a steep drop from the 193,000 gained in August. From January through March, job growth averaged 207,000 jobs a month. For April through June, the average was 182,000. For July through last month, it was just 143,000.
“We had assumed that the headwinds would dissipate, but in fact they didn’t,” IHS Global Insight economist Doug Handler said.
What is more, the 16-day partial shutdown of the government, which began on Oct. 1, will likely further depress hiring for this month.
That is because government contractors and other companies affected by the shutdown imposed temporary layoffs.
And the budget battles that led to the shutdown are likely to flare up later this year and in early next year.
Last week, Congress agreed to keep the government running only until Jan. 15 next year while US President Barack Obama and Congress seek a broader budget agreement.
In the meantime, uncertainty about another budget impasse — and potentially another government shutdown — may cause some businesses to hold off on hiring or expanding.
“Companies are not feeling confident enough to expand, to hire, to invest,” BNP Paribas economist Yelena Shulyatyeva said. “They’re just sitting on the sidelines, being cautious, and watching all these headlines from Washington.”
Consider Patrick Shrader, vice president of Arundel Manufacturing, based near Portland, Maine.
Shrader said the uncertainty and brinkmanship in Washington have led his company to postpone hiring.
Arundel makes precision metal components for oil and gas drilling equipment, aircraft and semiconductor manufacturers.
Defense contracts account for about one-fifth of business.
The company has enough work to support up to 10 hires, on top of its current staff of 80, Shrader said.
However, it is not ready.
“We’re not prepared to bring anybody else on board until we figure out what’s going on after Jan. 15,” he said.
While companies were adding jobs at a healthy pace in the first six months of the year, the economy was expanding at a meager annual rate of 1.8 percent.
Brief periods of robust job gains have raised hopes only to fizzle.
The weak economic growth appears to have caught up with employers. They are now adding fewer jobs. That has been particularly noticeable among companies that depend on consumers, like restaurants and retail chains.
A category that includes hotels, restaurants and entertainment companies, such as amusement parks, has added just 5,000 jobs over the past three months. That is down from 146,000 over the previous three months.
Retailers are still hiring. However, the 21,000 positions they added last month were the fewest in six months.
Consumer confidence plummeted during the government shutdown to the lowest level in nearly two years, according to Gallup.
And pay raises have been slight: Average hourly pay rose just 2.1 percent last month in from 12 months earlier. That is barely keeping up with historically low inflation.
Many economists estimate that the partial government shutdown cut US$25 billion out of the economy and slowed growth to about a 2 percent annual rate in the October-December quarter.
That is weaker than estimates before the shutdown that the economy would expand at a 2.5 percent annual rate this quarter.