New government data released Tuesday showed that business hiring slowed significantly last month. The Labor Department reported that the economy added 148,000 jobs, well below analysts’ expectations and down from nearly 200,000 jobs added in August. The unemployment rate dipped to 7.2 percent.
The data were collected before the federal government shutdown and the fight over the debt ceiling this month, and economists say the picture has gotten gloomier since then. And the bright spot of the recovery — a rebound in the housing market — appears to be losing steam because of a jump in mortgage rates.
All of this could cast a pall over the all-important holiday shopping season, when retailers ring up the bulk of their sales, analysts say.
“A lot of employers really sat on their hands in October in terms of hiring decisions, sort of like the deer caught in the headlights,” said Scott Anderson, chief economist at Bank of the West. “I’m afraid that this lackluster job growth could hang on until early next year.”
Even before the government shutdown, the job market seemed to be sputtering. The data released Tuesday showed typically strong fields such as financial services and leisure and hospitality shed jobs in September, while the gains in professional services were more muted last month.
The construction industry added 20,000 workers in September, one of the biggest jumps of any sector. But the increase comes after six months of almost no change, despite expectations that it would get a boost from the improving housing market.
In fact, sales of existing homes slowed down in September, according to the National Association of Realtors. The trade group warned that higher mortgage rates are hurting affordability. Interest rates on a conventional 30-year mortgage have risen by a whole percentage point since April, according to Freddie Mac.
The government shutdown exacerbated those problems, economists said. The White House estimated Tuesday that the closure shaved a quarter of a percentage point from the annualized rate of growth during the fourth quarter and cost 120,000 jobs through mid-October.
Furloughed workers will receive back pay and lawmakers avoided a potentially catastrophic default on the nation’s debt, minimizing the direct economic damage, but the blow to Americans’ psyche could be much harder to repair.
“Part of growing is having the confidence and belief that you should grow,” said Frank Friedman, chief financial officer at Deloitte. “You see the light at some point. I think people are just concerned that they don’t.”
Consumer confidence nose-dived amid the gridlock in Washington, potentially dampening spending and discouraging businesses from hiring. And looming are the new deadlines that lawmakers set early next year for negotiating a budget and the nation’s borrowing limit.