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Recession Fears Ease As Jobs Increase

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The Associated Press

Published: October 6, 2007

WASHINGTON - Fears that the country could slide into a recession eased in September as employers created the most jobs in four months and workers' wages grew solidly. The unemployment rate crept up to 4.7 percent, the highest in more than a year but still low by historical standards.

The tally of 110,000 net new jobs generated in September clearly heartened investors and analysts. Yet, what they really took comfort in was the revelation the job market, a main pillar of the economy, didn't crack under the pressure of a painful credit crunch and housing slump in August.

The Labor Department's fresh snapshot of employment conditions around the country released Friday showed the economy created 89,000 jobs in August.

That was a huge and crucial turnaround from the loss of 4,000 jobs, the first decline in four years, reported a month before. At the time, that news sent Wall Street into a nosedive, stoked fears the economy was heading toward recession and was seen as cementing the Federal Reserve's decision to lower interest rates.

To be sure, the ill effects of the housing and credit problems have hurt some employers, slowing national job growth this year. But the situation is nowhere near as dire as many were led to believe from the initial August employment report.

'We are on much sounder footing,' said Carl Tannenbaum, chief economist at LaSalle Bank. 'To be fair, it is clear the pace of monthly job creation has slowed and the unemployment rate is creeping higher, but neither measure is indicative of an imminent recession, which was the scenario on everyone's lips just a month ago.'

A big gain in government employment, especially in hiring teachers at local schools, is the main reason behind the turnaround in the August payroll figure.

The bump up in the unemployment rate from 4.6 percent in August came as hundreds of thousands of people, perhaps feeling better about their prospects, resumed job searches.

The new rate of 4.7 percent, the highest since the summer of 2006, is still considered low by historical standards. After the country's last recession, in 2001, the unemployment rate peaked at 6.3 percent. More than two decades ago, for example, civilian unemployment went higher than 10 percent as the economy suffered through deep downturns.

President Bush, coping with record-low approval ratings for his handling of the economy, welcomed the new employment figures.

'I am really pleased with the economic news, but I don't take good news for granted,' Bush said. 'I understand that people are worried about their mortgage payments, or concerned about sending their child to college. I know that people are concerned about whether or not they're going to have enough money to meet their needs.'

Bush called on Congress to keep taxes low.

Sen. Charles Schumer, D-N.Y., countered that the Bush administration needs to 'spend more time putting the conditions in place for good-paying job creation and shoring up our battered housing market.'

The strain from housing and credit woes was clearly evident in some industries. Construction companies, financial firms, factories and retailers cut jobs last month. However, gains in education and health services, professional services, leisure and hospitality, and government more than offset those losses, leading to a net gain in new jobs in September.

Those with jobs saw fatter paychecks.

Average hourly earnings rose to $17.57 in September, up 4.1 percent during the past 12 months. It was the highest annual gain since February. Wage growth is the fuel for consumer spending, a major contributor to national economic growth.

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