Stocks fall in eurozone as U.S. jobs report adds to investor worries

On Monday, Asia's stock market took a tumble, and markets in the European Union followed suit with falls of their own.

The reason for the beating taken by the foreign markets centered largely on fears that the U.S. is sliding back into a recession after a Friday report that the nation added no new jobs in August and kept its unemployment steady 9.1%. Another factor is worry over the ongoing European debt crisis, according to a report from the Associated Press.

Reactionary market declines could be seen across Europe on Labor Day as the U.S. stock market was closed. Germany's DAX index fell 5.28%, France's CAC 40 fell 4.73%, the FTSE 100 in London fell 3.58%, and the Euro Stoxx 50 fell 5.11%.

Retail sales across the 17-nation eurozone saw a surprise increase in July, but a report on the E.U.'s services sector released Monday revealed a slowdown across Europe for the fifth consecutive month, the AP said.

"The purchasing managers' index for the eurozone showed the services sector was still growing -- unlike the manufacturing sector -- but only barely," the AP said. "That will add pressure on the European Central Bank to keep interest rates on hold when it meets this week."

The souring economic situations in Asia, Europe and the U.S. are leaving investors with "so much uncertainty, so much fear, that investors don't know what to do," David Kotok, chairman and chief investment officer at Cumberland Advisors, told the AP. "I don't remember the last time stocks were so cheap and nobody wanted them."

More evidence of investor worries were evident as well.

"The difference in interest rates between the Greek and benchmark German 10-year bonds, known as the spread, spiraled to new records on Monday, topping 17.3 percentage points," the AP said. "Yields on the Greek bonds were above 18%."

President Obama is set to give a major speech Thursday night in which he is expected to lay out proposals seeking to spark job creation. Obama previewed his speech in Detroit on Monday, saying the Republican Party will be publicly held accountable if its members don't support his job-creation plans.

From Monday's slumps in Asia and Europe, it's clear that investors on those continents will be watching to see whether Obama and U.S. lawmakers can turn the tide and stave off another recession.

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Asian shares tumble on grim U.S. jobs report

Asian shares suffered heavy losses Monday on the first day of trading after last week's bleak U.S. jobs report intensified fears of a global recession.

Japan's Nikkei 225 index was down 1.8%, Hong Kong's Hang Seng index lost about 3% and South Korea's Kospi nosedived 4.4%.

China's benchmark stock index slumped 2% to close at a 13-month low on fears the government would continue to tighten monetary policy.

Chinese Premier Wen Jiabao said last week that stabilizing consumer prices is the government's chief priority.

At a press conference in Beijing Monday, World Bank President Robert Zoellick said inflation remains China's biggest short-term risk.

The former U.S. Deputy Secretary of State was meeting Chinese leaders in preparation of a joint report to be released later this year outlining steps China needs to take to rebalance its economy away from exports and investment toward domestic consumption.

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Photo: A South Korean currency trader covers his face with his hands in front of screens Monday. Credit: Ahn Young-joon / AP.

Public Job Creation

Nancy Folbre is an economics professor at the University of Massachusetts Amherst.

President Obama has signaled a new commitment to combating unemployment, with a major speech planned for later this week. The big question is whether his battle plan will go beyond indirect means of encouraging long-run employment growth (such as tax incentives) to include public job-creation programs that could significantly lower unemployment over the next year.

Today’s Economist

Perspectives from expert contributors.

His Republican critics take a “been there, done that, didn’t work” approach to economic stimulus. But President Obama’s stimulus plan, the 2009 American Recovery and Reinvestment Act, relied primarily on tax cuts and increases in aid to the states, shying away from direct federal job-creation efforts that were considered politically risky. (Jared Bernstein, chief economic adviser to Vice President Joseph R. Biden Jr. at the time, provides a clear account of the administration’s rationale).

Perspectives from expert contributors.

The stimulus helped the economy toward recovery. Increased aid to the states temporarily buffered the impact of state and local budget cuts. But over all, the Obama administration has been characterized by public job elimination rather than creation. The latest estimates of government employment (preliminary estimates for July 2011) show a significant decline since 2008, to about 22 million from about 22.5 million.

This decline in public employment will inevitably be intensified by further cuts in public spending and has particularly ominous implications for women, who make up a disproportionate share of state and local payrolls.

As Eileen Appelbaum points out, men were harder hit by job losses in 2009 than women but also faster to regain jobs as private sector hiring revived. A recent report from the Institute for Women’s Policy Research provides a vivid, up-to-date graph of these trends.

As of August 2011, the seasonally adjusted unemployment rate for men 16 and older was 9.6 percent; that for women, 8.5 percent. A new Economic Policy Institute report notes that persistently high unemployment has lowered the earnings and family income of a wide swath of American families.

Democrats to the left of President Obama have long argued the need for direct job creation through new federal programs, targeted transfers to state and local governments or both. Robert Reich, who served as secretary of labor under President Clinton, has offered a model speech along with a model plan.

The National Urban League, a prominent civil rights organization, has outlined a 12-point proposal, Putting America Back to Work.

Representative George Miller, Democrat of California, has introduced several legislative proposals, most recently the Local Jobs for America Act. Money would go directly to eligible local communities and nonprofit community organizations that would decide how best to use them. The act would also underwrite approximately 50,000 additional private-sector on-the-job training positions to help businesses put people back to work.

Representative Jan Schakowsky, Democrat of Illinois, has sponsored the Emergency Jobs to Restore the American Dream Act, which puts more explicit emphasis on money for schools, health care and community service. This program would be fully financed through separate legislation creating higher tax brackets for millionaires and billionaires, elimination of subsidies for major oil companies and closing of corporate tax loopholes that encourage offshoring of American jobs.

In a post last year, I described several specific proposals to create jobs in home-care services, including a voucher program to help subsidize the cost of home aides for the elderly, moving them out of nursing homes and back to their own homes.

Last week, Heidi Hartmann, president of the Institute for Women’s Policy Research, mobilized an online discussion of participants in the Womens Scholars Forum (including me). The resulting briefing paper summarizes a number of additional ideas, such as expanding the length of the school day and school year to improve educational outcomes and developing an Urban Conservation Corps.

The briefing paper emphasizes a longstanding concern of women’s organizations: the need to make sure that “women get their fair share of jobs that are nontraditional for women, for example technical and craft jobs in construction, transportation, and green energy and that are supported by federal dollars or federally guaranteed loans.”

A good example of targeted spending in this area is a small grant that the Women’s Bureau of the Department of Labor recently awarded to Austin Community College in Texas to recruit women to a renewable energy training program.

A strong public job-creation effort could help qualified graduates of programs like these find jobs improving the energy efficiency of schools and other public buildings. The employment impact would be both quicker and more reliable than subsidized loans or tax breaks for renewable energy companies.

Right now, the unemployed themselves represent an important form of renewable energy that is going to waste. That’s why President Obama should take a close look at proposals to put them to work in a variety of publicly financed jobs.

Is California economy improving, or worse than ever?

Depending on who you ask this Labor Day, California's economy is either on its way up or headed straight for the crapper.

A report released today by the California Budget Project finds that the state has a historically low level of employment, even as earnings are declining for most workers. By July, the report says, the state had gained back only one out of six jobs lost during the recession. The state added only 2,760 jobs a month between February and July.

Government is dragging down the economy, the report says. Over the last three years, the state has lost public sector jobs at a rate twice that of the nation as a whole, the report says. Inland areas aren't helping either -- between June 2010 and June 2011, the Inland Empire lost 10,300 jobs.

Finally, inflation-adjusted earnings in California declined 1.9% between 2006 and 2010, the report says, making a typical worker have less purchasing power in 2010 than at any point in the last 10 years.

"Coupled with the latest figures showing extremely slow growth in the national economy, these state trends make it clear that we're a long way from a recovery that makes a real difference for California's workers and their families," said the report's author, Alissa Anderson, deputy director of the California Budget Project.

But according to a Labor Day Briefing from the state Employment Development Department, California "has been gaining jobs at the fastest rate since the boom year of 2006" and more quickly than the nation as a whole. California is also outpacing the nation in private job growth, the EDD says.

The EDD says California added 189,400 jobs from July 2010 to July 2011, which is a 1.4% growth rate at a time when the nation's employment picture grew just 1%. The state's year-over-year July job growth rate is the strongest in five years.

Industries that managed to grow year over year in July included professional and business services, education and health services, and even construction, the EDD points out. It says there are occupations that are projected to grow in the state: executive secretaries, registered nurses and accountants.

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