A group of senators already is quietly attempting to craft a bipartisan solution to the nation’s budget deficit, which has topped $1 trillion in each of the past four years.
Lawmakers probably will agree to allow some, but not all, of the scheduled fiscal contraction to take place, said Philip Suttle, chief economist of the Institute of International Finance in Washington. The group, which represents more than 460 financial companies worldwide, forecasts the budget tightening next year will amount to about 1.7 percent of GDP.
“Uncertainty around the fiscal cliff has already caused firms to postpone capital-goods orders,” Joshua Dennerlein, U.S. economist for Bank of America Corp. in New York, said in a note after the release of the jobs numbers.
Shipments of nondefense capital equipment excluding airplanes, a proxy for business investment, fell 0.9 percent in August after decreasing 1.1 percent in July, according to Commerce Department figures.
Dennerlein called the September jobs report “solid” while voicing doubts that it will be sustainable. “We continue to expect job growth to fade in the fourth quarter” as companies rein in hiring until they see what happens in Washington.
JPMorgan’s Kasman, though, said he takes “comfort” from the employment report because it suggests that weakness in capital spending “is not broadening out” to hiring.
A proxy for labor income that combines hours worked with wages grew around 2.5 percent in third quarter, about the same as in the second, he said.
The “economy remains on a slow, but not slowing, growth path,” said Kathy Bostjancic, director of macroeconomic analysis for the Conference Board in New York.