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Growth in Jobs Ends as Housing Crunch Widens
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That increased pessimism was apparent on Wall Street yesterday. The Dow Jones industrial average fell 249.97, or 1.9 percent, to 13,113.38. The technology-heavy Nasdaq fell 48.62, or 1.9 percent, to 2565.70 The broad-based Standard & Poor's 500-stock index fell 25, or 1.7 percent, to 1453.55. The Federal Reserve has been watching for signs that problems in the housing sector and credit markets would affect the broader economy. The president and chief executive of its Atlanta bank, Dennis P. Lockhart, confirmed that stance in a speech Thursday. "So far, I have not seen hard or soft data that provide conclusive signs that housing problems are spilling over into the broad economy," he said.
Fed analysts interpreted the employment data as such a sign, and now think it is likely that the Fed's policymaking committee will cut its benchmark federal funds rate of 5.25 percent by at least a quarter point when it meets Sept. 18. Doing so would lower costs of borrowing to consumers and businesses, stimulating the economy.
"Now we're going to get a cut," Gault said. "The question is how much."
The Bush administration stressed that there were positives in the jobs report. The 4.6 percent unemployment rate is stable at what is, by historical standards, a low level. And wages for non-supervisory workers rose 3.9 percent over the 12 months ended in August.
"It's not the kind of number I'd like to see," Treasury Secretary Henry M. Paulson Jr. told Bloomberg Television. "Data does not always move in a straight line, so occasionally you will find some surprises. The economy will continue to grow in the second half of the year."
Congressional critics were less sanguine.
"Too little has been done to quiet the market's justifiable fears that things are headed downhill," said Sen. Charles E. Schumer (D-N.Y.), chairman of the Joint Economic Committee, who called the report a "punch to the gut of our economy."
Tse reported from New York. Staff writer Howard Schneider contributed to this report.
