The ADP October Employment Report was released Wednesday and it is not good news: Only 130,000 private sector jobs were added in October. Furthermore, ADP’s September estimates were revised down to 145,000 from the 166,000 reported at the time.
Mark Zandi, chief economist of Moody’s Analytics blamed the weak numbers on the government shutdown and other theatrics in Congress. He warned that things could get worse.
“The government shutdown and debt limit brinksmanship hurt the already softening job market in October. Average monthly growth has fallen below 150,000. Any further weakening would signal rising unemployment. The weaker job growth is evident across most industries and company sizes,” Zandi warned.
Of the paltry 130,000 new jobs, 81,000 were created by large businesses, those with over 500 employees. This is unusual because most new jobs have traditionally been added by small businesses. The vast majority of those, 79,000, were added by very large companies with over 1,000 employees.
This seems to indicate is that the government shutdown and brinkmanship is hurting small businesses far worse than large corporations. Small businesses are our traditional job creators. If they stop hiring the economy is in trouble.
The two most likely reasons small business is being hurt are: First of all, over a million federal employees were not paid during the shut down, and did not know if and when they would be. Those workers were forced to cut down on spending.
Secondly, the shutdown raised fears among consumers that resulted in one of the fastest drops in consumer confidence in years. When consumers stop buying, small business takes the hit first because they have fewer resources to weather politically-manufactured economic storms.
The construction sector added 14,000 jobs. Most of these were builders delivering homes sold prior to the shutdown. It is reasonable to expect that the shutdown and fears of a repeat in January will stifle new homebuyers over the next few months.
As usual, most of the new jobs were in the service sector—107,000. This number is likely to be revised downward next month when final figures are in. Manufacturing added 5,000 workers in October mostly in large companies and many of these were in the automobile industry due to higher than expected sales in late summer.
Carlos Rodriguez, president and chief executive officer of ADP said that the 130,000 jobs were well below the monthly average over the last 12 months.
Economists estimated that the government shutdown cost the economy $24 billion dollars. It was a gift that keeps on hurting, however, because Congress did not solve the problem; it just pushed it into January because of negative polls.
The public has no reason to believe that Congress will not repeat the political theatrics after the first of the year. The shutdown happened because Republicans wanted to use the threat of economic calamity to force Democrats and the White House to repeal the Affordable Care Act. They failed but have vowed to try again.
Whether a person favors Obamacare or not, the fact that Republicans are continuing to use a shut down and default as leverage will have a chilling effect not only on small business, but on the economy. As Mark Zandi said, if this continues it will begin driving unemployment up, and it will severely damage our GDP. The risk of a recession is not unreasonable.
This manufactured crisis by our own Congress—or at least one party in that Congress—came on the heals of furloughs of millions of government and private sector employees due to sequester. It came just as the economy appeared to be bouncing back after the recession. To an outsider, it looks like destruction of the economy might be the goal of certain politicians so they have a political issue for a presidential race. Intentional or not, the damage to the American people is the same.
On Friday, the official jobs report will be released. It is expected to show a drop in employment and possibly the unemployment rate will tick up. The worst enemy of the American people seems to be its own Congress.
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