Tags: US | Economy

Wall Street Tremors Could Crimp Future Hiring Gains

Friday, 07 May 2010 07:11 AM

 

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Employers likely added to their payrolls in April, but Europe's spreading debt crisis has jolted Wall Street and might dampen further job gains.

Signs have multiplied in recent weeks that the economic recovery in the United States has gained traction. Still, companies have been loath to rev up job creation.

Now, the debt crisis that erupted in Greece and sent stocks plunging Thursday adds to companies' uncertainties. That could make them more cautious about hiring, economists warned.

"The situation amplifies the uncertainty," said Lynn Reaser, chief economist at Point Loma Nazarene University in San Diego and president of the National Association for Business Economics.

An enduring Wall Street panic could endanger the recovery if it caused businesses and consumers to pull back on spending.

The nation probably added a net total of 200,000 jobs in April, economists predict. That would be up from 162,000 added in March, the most in three years. But a big chunk of April's net job gains — perhaps 120,000 — is expected to come from the government's hiring of temporary census workers.

By contrast, private companies — the backbone of the economy — probably added only around 75,000 jobs last month, economists say. If they're right, that would mark a slowing from the 123,000 new jobs added in March.

The unemployment rate for April is expected to remain at a stubbornly high 9.7 percent, where it's stood since January.

Hiring isn't expected to be robust enough anytime soon to lower the unemployment rate much. Economists think it will remain above 9 percent by the November midterm elections. That could make Democratic and Republican incumbents in Congress vulnerable.

Just 21 percent of Americans consider the economy in good condition, according to an Associated Press-GfK Poll conducted April 7-12.

For employers to boost hiring significantly, the economy would need to grow at an annual rate of 6 percent to 8 percent a quarter, rather than the 3.2 percent pace logged in the first three months of this year, economists say. Such growth would mean shoppers were spending much more freely. That would give companies confidence that sales gains would last.

That scenario, though, isn't likely.

High unemployment and sluggish wage gains are likely to prevent consumers from going on spending sprees any time soon. Small businesses, which usually help drive job creation during recoveries, are having trouble getting loans. That tight credit is crimping their ability to expand operations and hire.

Europe's debt crisis will probably dampen demand for U.S. exports. And the debt crisis may continue to weigh on markets. Thursday's stock market plunge — the Dow Jones industrial average dropped nearly 1,000 points before recovering two-thirds of its losses — introduced fresh uncertainties.

Many economists think it will take until at least the middle of the decade to lower the unemployment rate to a more normal 5.5 percent to 6 percent.

The worst recession since the 1930s has wiped out 8.2 million jobs, making the competition for any openings fierce. On average, five to six unemployed people are competing for each opening.

"It's going to be a long and painful road back to normal," said Brian Bethune, chief U.S. financial economist for IHS Global Insight.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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