Economy adds zero jobs in August as recession fears grow

The U.S. economy added a net total of zero jobs for the month of August, prompting new fears about a double-dip recession. 

Private-sector firms added 17,000 jobs, while state and local governments continued to shed workers. The unemployment rate held steady at 9.1 percent. 

The result was worse than the anemic projections that the economy would add around 75,000 jobs for the month. It is a far cry from the 117,000 jobs added in July, and that number isn't enough to keep up with the growth in population either.

Deeper in the numbers, there were more signs for concern. The average workweek dropped by 0.1 hour, and average earnings fell by three cents. 

Stocks fell on the news, with the Dow Jones Industrial Average down more than 150 points at midday.

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The economy needs to add at least 150,000 jobs per month to keep up with population changes. These dismal numbers are a problem for President Obama, who is likely to face a difficult path to reelection next year given the sluggish job growth.

Polls show a majority of voters disapprove of Obama's handling of the economy, and Obama's daily approval numbers have at times slipped below 40 percent.

In a related development, the White House announced Friday it was squashing a proposed Environmental Protection Agency regulation on smog. In killing the regulation, which was intended to improve public health, Obama in a statement said he was worried about imposing new regulatory burdens during the economic recovery. 

The latest figures add urgency to the jobs speech Obama will deliver next Thursday to a joint session of Congress. Obama, who is not scheduled to speak publicly on the jobs figures on Friday, is expected to offer a mix of proposals to reduce the long-term deficit while giving the economy a jolt in the short run.

The White House released a statement from Katharine Abraham, a member of the Council of Economic Advisors, that said it is important not to read too much into any single report. Abraham also said the figures highlight the need for Congress to pass a surface transportation bill when it returns to Washington next week to keep construction workers on the job.

Republicans and Democrats blamed one another for the poor figures, with the GOP saying the threat of new taxes and regulations was creating uncertainty that was hurting the economy, and Democrats arguing it was the GOP that was responsible for instability. 

In a statement, Speaker John Boehner (R-Ohio) blamed the "triple threat" of "higher taxes, more failed stimulus spending and excessive federal regulations" for undermining private-sector job growth. 

He said these policies have created "a fog of uncertainty that's left small businesses unable to hire and American families worried about the future."

Yet taxes have actually gone down for most households this year because of the agreement in December on a payroll tax cut. That deal also extended all of the Bush tax rates, which are now set to expire at the end of next year. 

Still, Democrats and the White House would like to raise some business taxes and want to let expire Bush tax rates on wealthier households. They failed to get any of these tax measures included in the recent deal to raise the debt ceiling. 

House Democratic Leader Nancy Pelosi (D-Calif.) blamed Republican threats during the debt ceiling debate, which she said risked causing a government shutdown or default, for creating instability and limiting job growth.

House Majority Leader Eric Cantor (R-Va.) said he believes there are some areas where his conference can work with Obama on policies to help get people back to work. In a statement, he said he agreed with Obama's suggestion earlier this week that states should get more control over infrastructure projects. Cantor also mentioned reforms to the unemployment system as an area where there might be some compromise.

The anemic growth will be a talking point in the debate about whether Washington should continue to focus on reducing spending or whether it should consider targeted spending measures or tax breaks to stimulate job growth. 

Republicans in the House do not want to increase spending, saying federal unemployment insurance should not be extended again and the payroll tax be allowed to expire. Some economists say allowing those two provisions to end would just further choke off the economy.

The president's budget office on Thursday downgraded its expectations for the economy over the next year, saying it expected unemployment to hover around 9 percent through Election Day 2012. 

— This story was first posted at 6:59 a.m. and last updated at 12:22 p.m.