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Tax jitters, Sandy hold back hiring, experts say

– The combination of U.S. employers that shut down because of Superstorm Sandy and fears over looming tax increases and spending cuts likely slowed hiring sharply in November.

A private survey released Wednesday showed companies added fewer workers last month than in October.

The same picture is expected when the government issues a more comprehensive jobs report for November on Friday.

Still, most analysts say the underlying economy remains healthy and is creating jobs at a still-modest but steady pace.

Economists expect Friday’s government report to show employers added 110,000 jobs in November, according to FactSet. And they think the unemployment rate will remain 7.9 percent.

Other analysts expect much lower job gains, roughly 25,000 to 50,000, because of Sandy and anxiety over the tax increases and spending cuts set to take effect in January.

Yet without the depressive effects of Sandy, many think employers would have added up to 200,000 jobs last month – even stronger than the solid 171,000 jobs added in October.

“We don’t think the labor market has lost any underlying momentum,” said Paul Edelstein, an economist at IHS Global Insight. “We just have these two issues.”

Sandy tore into the East Coast on Oct. 29, closing restaurants, retailers and other businesses and cutting off power to 8 million homes in 10 states.

The government would count people who couldn’t get to work and weren’t paid as job losses, even if they were temporary. Those subtractions would reduce net hiring.

Though Sandy shrank some company payrolls, it might not have affected the unemployment rate. The rate is calculated from a separate government survey of households.

The government asks about 60,000 households each month whether the adults have jobs and whether those who don’t are looking for one. Those without a job who are looking for one are counted as unemployed. Those who aren’t looking aren’t counted as unemployed.

Many workers who were temporarily dropped from payrolls because of Sandy would still consider themselves employed. As a result, the unemployment rate might not change much, if at all, for November.

Service sector expands

Slight acceleration
: U.S. service companies grew at a slightly faster pace in November because sales and new orders rose, a good sign for the economy. The Institute for Supply Management said its index of non-manufacturing activity rose to 54.7 from 54.2 in October. Any reading above 50 indicates expansion.
Service economy
: The report measures growth in many industries, including retail, construction, health care and financial services firms. The industries covered employ about 90 percent of the work force.
Hiring slows
: A measure of employment fell to the lowest level since July but still showed companies added workers last month. Superstorm Sandy and concerns about looming tax increases and spending cuts probably reduced hiring, economists said.

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