Employers added no net jobs last month, and the unemployment rate stayed at 9.1 percent. The bleakest jobs report since September 2010 resurrected fears that the economy could fall back into another recession.
More jobs and higher income are needed to get people to spend more. Instead, hiring has been sputtering, even before August. Employers 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.
Here are some questions and answers about Friday's jobs report:
Q. What happened to employment in August?
A. It was a dismal month. During August, lawmakers fought over raising the debt ceiling. Standard & Poor's downgraded long-term U.S debt. Stocks sank nearly 16 percent in three weeks. And the government had just reported that the economy barely grew in the first half of the year. "If you were a business person and you were watching what happened in August, you were not going to hire," said Joel Naroff of Naroff Economic Advisors.
Q. Are we in a recession?
A. It feels that way to many people. That's especially true for 14 million unemployed and 11 million others who either aren't looking for work until the job market brightens or who work part time but want a full-time job. But for economists, a recession happens only with a sustained drop in growth, employment and income. That hasn't happened yet. The economy grew in the first six months of this year, though at a scant 0.7 percent annual rate. And employers have added about 900,000 jobs this year _ even though that's a small fraction of the more than 7 million lost in the recession that officially ended more than two years ago.
Q. So if this isn't a recession, then what is it?
A. Some call it a "growth recession": The economy is growing but isn't adding enough jobs to lower unemployment. Consider the 2001 downturn. For the first 18 months after it ended, the economy shed jobs even though it grew at an annual rate of 2.1 percent. Moody's Analytics expects monthly job gains to remain below 100,000 through the middle of 2012 _ barely enough to keep up with population growth. Without more jobs, consumers won't spend more. Companies could delay hiring. Incomes would languish further. Such a vicious cycle raises the likelihood of another recession. "It can just become self-perpetuating," said Moody's economist Sophia Koropeckyj.
Q. When was the last time the economy was this bad two years after a major recession ended?
A. Not since the Great Depression. There have been very slow recoveries, including after the two previous recessions, in 2001 and 1990-91. Both were deemed "jobless recoveries," because the unemployment rate climbed for months after they ended. But not since the Depression has unemployment been this high this long into a recovery. The rate has topped 9 percent for all but two months since May 2009. There are still 6.9 million fewer jobs than before the recession began.
Q. What will it take for the economy to regain its health?
A. Many economists expect growth to pick up modestly in coming months, though Friday's jobs report may cause some to downgrade their forecasts. Gas prices have eased after spiking this spring. Auto makers are boosting production. They're seeing higher sales now that supply disruptions stemming from Japan's earthquake have eased. But the economy desperately needs more jobs.
Q. What can President Barack Obama or the Federal Reserve do to boost growth?
A. Not much, according to some economists, especially given the gridlock in Washington. Obama will ask Congress next week to tap federal resources to boost employment and economic growth. Yet that plan is "likely to be dead on arrival," said Neil Dutta, an economist at Bank of America Merrill Lynch. Republicans will probably oppose any new spending. Chairman Ben Bernanke might decide to shift more of the Fed's short-term bond holdings to longer-term securities. That could help hold down long-term interest rates. But 30-year mortgage rates are already near record lows, and this year is on pace to be the worst for home sales in 14 years.