Stagnant Job Growth Renews Recession Fears

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Job growth stalled completely in August, leading to renewed fears the U.S. economy could tip into recession. Employers added zero net jobs during the month, and the unemployment rate held steady at 9.1 percent. It was the first time the economy failed to add new jobs in nearly a year.

ROBERT SIEGEL, host: From NPR News, this is ALL THINGS CONSIDERED. I'm Robert Siegel.

MELISSA BLOCK, host: And I'm Melissa Block. Expectations for job growth in August were low, but the results announced today did not even meet those low expectations. The government reported that last month, the number of jobs added to the economy was zero. The unemployment rate remains stuck at 9.1 percent. NPR's John Ydstie reports.

JOHN YDSTIE: Prior to the release of today's report, there was lots of speculation that the financial turmoil in August might have scared consumers from spending and employers from hiring. The debt ceiling debacle in Washington, the downgrading of the government's credit rating and a flare-up of Europe's sovereign debt crisis created chaos in global stock markets. John Silvia, chief economist for Wells Fargo, says that turmoil could well have played a role, but the basic problem is slow growth.

JOHN SILVIA: The economy is not producing at a pace that really would lower the unemployment rate. It's not producing at a pace that we're absorbing a lot of young people or new entrants into the labor force and it's very disappointing.

YDSTIE: During the past four months, the sluggish U.S. economy added fewer than 100,000 jobs a month, the threshold needed to simply absorb those new workers. With economic growth so slow, says Silvia, the economy is clearly skating on thin ice.

SILVIA: We talk now about a probability of 30 percent for recession. The challenge, as everyone knows who's ever skated on some thin ice on a river as a child, you know, there's not a lot of margin for error.

YDSTIE: A bit reason for the slow growth, says Silvia, is a lack of demand from consumers. Heidi Shierholtz agrees. She's a labor economist at the economic policy institute in Washington, a liberal think tank.

HEIDI SHIERHOLTZ: People aren't buying goods and services, so that's the lever that we need to push to start stimulating the economy to generate jobs.

YDSTIE: And that's what President Obama hopes to do with a plan he'll unveil next Thursday in a speech before a joint session of Congress. The president is expected to propose extending the payroll tax cut for individuals and adding some tax incentives for businesses to hire workers and he's likely to call for more government spending on the nation's infrastructure.

DYKE MESSINGER: I really wasn't surprised about the lack of job growth because that's really what we're seeing here.

YDSTIE: That's Dyke Messinger, president of a company called Power Curbers in Salisbury, North Carolina. He sells machines that produce curbs and gutters for streets and highways. His business is off close to 40 percent from its pre-recession level. While he's still selling machines in Asia and the Middle East, sales in the U.S. are dismal. Not surprisingly, he thinks government spending for infrastructure is important and not just to create new jobs.

MESSINGER: Most of our equipment going overseas is going to countries where they're making major infrastructure investments so that they can be more competitive and we're just not doing that.

YDSTIE: Wells Fargo's John Silvia expresses concern that those infrastructure investments might not come quickly enough. He'd like to see a plan that would lower the cost of labor for employers in this weak economy, like the program pioneered in Georgia, where workers get temporary jobs at firms and their salary is paid by their unemployment benefits.

SILVIA: In Charlotte, North Carolina, we have a lot of German firms who historically have done exactly that. They bring in talent, work with them a while in sort of an apprenticeship program and they find out if the worker fits. And the worker finds out if he fits.

YDSTIE: President Obama has expressed interest in the Georgia program and it's possible he'll propose something similar next week. The big question, of course, will his plan find support among Republicans in Congress or will the Washington deadlock continue as 14 million American workers remain on the sidelines? John Ydstie, NPR News, Washington.

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