Washington Employers added no jobs in August — an alarming setback for the economy that renewed fears of another recession and raised pressure on Washington to end the hiring standstill.
Worries flared Friday after the release of the worst jobs report since September 2010. Total payrolls were unchanged, the first time since 1945 that the government reported a net job change of zero. The unemployment rate stayed at 9.1 percent.
The dismal news two days before Labor Day sent stocks plunging. The Dow Jones industrial average fell 253 points, or more than 2 percent.
Analysts say the economy cannot continue to expand unless hiring picks up. In the first six months of 2011, growth was measured at an annual rate of 0.7 percent.
Companies are mostly keeping their payrolls intact. They’re not laying off many workers. But they’re not hiring, either. Without more jobs to fuel consumer spending, economists say another recession would be inevitable. Consumer spending accounts for about 70 percent of economic growth.
Like a wobbling bicycle, “you either reaccelerate or you fall over, said James O’Sullivan, chief economist at MF Global. “Something has to give.”
When growth is slow and unemployment high, companies feel little pressure to increase pay and benefits. In August, for instance, hourly wages fell.
And when unemployment is chronically high, even many people who have jobs worry about losing them. So they’re less likely to spend.
Eventually, as consumers cut back, corporate sales decline. Companies scale back hiring even more. Weak spending and hiring can feed on each other and edge the economy closer to recession.
When the economy is barely growing, it’s also vulnerable to shocks like natural disasters and political upheavals. An economy growing 5 percent a year can absorb more punishment than one growing at 1 percent before it would slip into recession.
Consumer and business confidence was shaken this summer by the political standoff over the federal debt limit, a downgrade of long-term U.S. debt and the financial crisis in Europe. Tumbling stock prices escalated the worries.
Even before it stalled last month, job growth had been sputtering. The economy added 166,000 jobs a month in the January-March quarter, 97,000 a month in the April-June quarter and just 43,000 a month so far in the July-September period.