Picture of the US economy is a hazy one

Latest data make Fed’s decisions even tougher

The economy added just 148,000 jobs in September, suggesting employers held back on hiring before a partial government shutdown began. Above, a Kentucky job fair.
Gary Emord-Netzley/Messenger-Inquirer via AP
The economy added just 148,000 jobs in September, suggesting employers held back on hiring before a partial government shutdown began. Above, a Kentucky job fair.

WASHINGTON — A hazy picture of the economy emerges from the most recent snapshots of retail sales, housing, manufacturing, the job market, and consumer confidence.

The data reflect higher borrowing costs, slower hiring, and rising uncertainty just before much of the government shut down Oct. 1 — all trends the Federal Reserve is trying to assess its meeting this week.

Taken together, they portray an economy that was stumbling even before the shutdown, which further slowed growth.


Americans’ recent spending has raised hopes that if Congress can reach a long-term budget agreement in coming months, economic growth will pick up.

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‘‘One of the things that’s really holding back the economy is this fog of uncertainty,’’ said Mark Vitner, an economist at Wells Fargo.

Congress and the White House agreed on Oct. 16 to reopen the government — but only until Jan. 15, when a new deal must be reached.

Nor is it clear when the Fed will begin to ease its stimulus for the economy. And the sloppy rollout of the Obama administration’s health care program has added to the reluctance of many small businesses to hire, Vitner said.

All this has made the Fed’s task of evaluating the economy harder than usual. The Fed is considering when to slow its $85 billion in monthly bond purchases, which help keep borrowing rates low to spur growth. Chairman Ben Bernanke has noted the Fed’s policy decisions are ‘‘data dependent.’’


Yet most of the economic data that will be released in coming weeks will be distorted by the government shutdown. For example, the October jobs report, due Nov. 8, may show a rise in the unemployment rate, but only because of the temporary layoff of government workers and contractors.

‘‘This is a very difficult time for the Fed,’’ Vitner said. ‘‘The data is not all that clear, and there are a lot of structural shifts in the economy.’’

Those shifts include an aging workforce, which means more older workers are retiring and dropping out of the workforce. That has artificially lowered the unemployment rate, making that key gauge of the economy less reliable. People who are out of work but have stopped looking for a job aren’t counted as unemployed.

The most recent reports the Fed will consider have pointed to a weak economy, though there are a few bright spots:

 Consumer confidence fell to a six-month low in October, according to the private Conference Board. The partial shutdown made Americans more pessimistic about growth and hiring. Lynn Franco, director of economic indicators at the board, said the ‘‘temporary nature’’ of the budget deal means confidence could fluctuate in coming months.


 Retail sales rose modestly in September outside of auto sales, the Commerce Department said. Auto sales fell 2.2 percent, the most in almost a year. But that was mostly because of a calendar quirk that shifted Labor Day weekend sales to August. Sales rose in most other areas.

 Higher interest rates and rising home prices discouraged many Americans from buying existing homes in September. A measure of signed contracts reached its lowest level in nine months. The National Association of Realtors’ index of pending home sales fell below the level it reached a year earlier.

 Orders for most long-lasting factory goods dropped last month as businesses cut back on spending. The decline suggested businesses weren’t confident about the economy.

 Hiring has slowed. Employers added an average of 143,000 jobs a month July through September, down from an average of 182,000 April through June and from 207,000 in the first three months of the year. The unemployment rate fell to a still-high 7.2 percent in September from 7.3 percent in August.

David Berson, chief economist at Nationwide Financial, said rising mortgage rates typically coincide with a strengthening economy and increased hiring. ‘‘But not this time,’’ he said. ‘‘This time we only had the rise in mortgage rates. We haven’t gotten the jobs.’’

The average rate on a 30-year mortgage rose to a two-year high of 4.58 percent in August; it has since fallen to 4.13 percent.