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Workers squeezed by slow job rise

The US marks Labor Day today with an economy growing, albeit more slowly than in the recent past. Yet some say the tepid pace of expansion means average workers are getting few of the benefits of economic growth.

The US economic picture brightened following a better-than-expected report on job growth on Friday, but some analysts say perils still lie ahead, and that a recession is still possible.

US employers added 128,000 jobs last month, according to the Labor Department's report on nonfarm payrolls, which is often seen as one of the best indicators of economic momentum.

The report allayed fears that a soft housing market, depressed consumer confidence and higher interest rates could tip the world's largest economy into recession.

The report "points to growth in the third quarter much in line with the 2.9 percent GDP growth rate achieved in the second quarter," said Nariman Berhavesh, chief economist at Global Insight.

Some said the report was the perfect tonic for the Federal Reserve as the central bank tries to engineer a "soft landing" for the economy, having last month paused in its two-year campaign of interest rate hikes.

"The US economy is slowing, holding job growth to a modest pace which, in turn, is keeping wage inflation in check," said Michael Gregory, a senior economist at BMO Nesbitt Burns.

"This is just what [Fed Chairman Ben] Bernanke ordered, and the Fed should remain in pause mode for the foreseeable future," he said.

Yet Jared Bernstein at the labor-oriented Economic Policy Institute argues that the cooling conditions highlight the struggle facing many wage-earners.

"While this slowdown in job growth may assuage inflation hawks, it hurts the prospects of many in the workforce," he said.

"Over the past year, wages for these workers are up 1.0 percent, far behind inflation, and the slowest annual growth rate since the 1940s," he said.

The economic statistics add to concerns voiced about recent Census Bureau data that showed stagnating incomes for most wage-earners and a bigger rich-poor gap.

"Four years into an economic recovery, the country has yet to make progress in reducing poverty, raising the typical family's income, or stemming the rise in the ranks of the uninsured, compared to where we were in the last recession," said Robert Greenstein of the Center on Budget and Policy Priorities.

Amid the softer economic conditions, more analysts are using the "R" word.

Merrill Lynch economist David Rosenberg said he believes the housing sector is already experiencing a recession of sorts that could bring down the rest of the economy.

Rosenberg is forecasting tepid growth for the second half of the year of 2 percent and an even weaker 1.8 percent expansion next year.

Peter Morici, an economist at the University of Maryland School of Business, said the Federal Reserve could still choke off the economy if it raises rates further.

"Weak jobs growth indicates higher interest rates are slowing the economic expansion and inflation will cool in the months ahead," Morici said.
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