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Federal government shutdown slows private-sector employment growth in N.J., economists say

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The nation's private employment growth slowed in October to 130,000 jobs, the smallest increase in six months, according to a survey released today by Roseland-based payroll data company ADP.

Small business gains were notably meager — a trend economists blame mostly on uncertainty caused by the federal government shutdown.

Rutgers University economics professor Joseph Seneca said national indicators are consistent with New Jersey, where the job market is progressing with "a light foot on the accelerator."

"We're stuck — not in neutral, but certainly not overdrive," said Seneca, a member of the university's Bloustein School of Planning and Public Policy.

ADP's October job gains rose by the lowest amount since April, when private employers added 124,000 jobs and trailed the 12-month average of more than 183,000 jobs. ADP also revised down September job growth from 166,000 to 145,000. Economists say the nation needs to add at least 200,000 jobs a month to generate noticeable progress.

Seneca said current figures don't suggest a big reduction in New Jersey unemployment, which came in at 8.5 percent in August, the most recent month available. The state's jobless rate is at its lowest point since March 2009 but still well above pre-recession levels.

"It's not enough to put a dent in the unemployment rate for the right reasons," Seneca said. "The decline in the unemployment rate has been happening for the wrong reasons. Unemployment has been going down because of declining labor force, not because of increasing employment."

According to ADP's national report, the biggest slowdown in October occurred among small businesses, defined as 50 or fewer employees, which added 37,000 jobs. That's down from a 12-month average of 71,250.

Mark Zandi, chief economist for Moody's analytics, attributed the ongoing weakness to fiscal austerity, mainly the combination of tax increases and spending cuts enacted by the so-called "fiscal cliff" deal in January, followed by the sequester in March.

Zandi said the government shutdown this month added to those problems, particularly among small businesses who can afford less uncertainty.

"Businesses are nervous," he said. "It's more likely small companies would be nervous than bigger companies just because they have fewer resources than bigger companies."

ADP said the majority of jobs, or 81,000, were added by large businesses, defined as 500 or more employees. For all the tepidness, Zandi said employment is still growing overall and should further improve if the political climate settles.

"Job growth is soft and weak, but it's not breaking," Zandi said.

Zandi said most encouraging was that goods-producing jobs rose in October, from 16,000 to 24,000. That improvement should result in more service jobs, which fell from 130,000 to 107,000 jobs in October.

Zandi said additional construction and manufacturing jobs bode well for recovery next year, assuming the political and economic climates are not still dominated by congressional gridlock.

Seneca agreed.

"Hopefully we won't have another high-cost, no-benefit exercise that just cost the economy $12 to $20 billion," Seneca said of the recent shutdown. "Hopefully there will be an epiphany and that will not be repeated. The political cost for doing this a third time will be tremendously high."

 

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