U.S. JOBS REPORT, WORSE THAN EXPECTED
U.S. JOBS REPORT, WORSE THAN EXPECTED
2004-01-11 at 10:42:00 am #4580December Jobs Report Worse Than ExpectedUnemployment Rate Falls, but Few Jobs Created
WASHINGTON (Jan. 9) – U.S. employers hardly hired any new workers in December, The government said on Friday in a disappointing report showing economic recovery has yet to translate into sustained jobs growth.The unemployment rate fell to 5.7 percent, the lowest in over a year and down from 5.9 percent in November. But this was mainly because 309,000 people dropped out the work force.
The number of workers on U.S. payrolls outside the farm sector in December increased by just 1,000, after a downwardly revised rise of 43,000 in November. It was the fifth consecutive monthly climb but was far below economist expectations for a rise of 130,000.
The poor report is a headache for President George W. Bush as he seeks re-election in November with the economy — specifically job creation — expected to be a key issue in the campaign.
But Bush, speaking to a small business forum, was upbeat, saying all economic signs were ”very strong.” He said the drop in the jobless rate was a ”positive sign” of an improving economy.
”It’s a shocker. The one ray of sunshine, the decline in the unemployment rate, is ironically a sign of weakness,” said Cary Leahey, senior U.S. economist, Deutsche Bank Securities, New York.
”The only reason it declined is that fewer people were looking for jobs in December.”
Since Bush took office, more than 2.3 million nonfarm jobs have been lost.
Pollster John Zogby said his surveys still show 21 percent of people, and 25 percent of those earning over $75,000, are afraid of losing their jobs in the next year.
Democrats seized the opportunity to criticize Bush’s record on the economy.
”I think it’s time that George W. Bush loses his job so that we can put the American people back to work,” said Democratic presidential hopeful Wesley Clark.
The dollar and stock markets fell, while the expectation of continued low interest rates caused U.S. Treasury bond prices to rise after the report. The Dow Jones industrial average ended the day down 133.55 points at 10,458.89. The dollar tumbled to a fresh low against the euro and benchmark Treasury yields, which move inversely to prices, posted their largest drop in more than two years.
The data reinforced expectations the U.S. Federal Reserve will keep interest rates on hold at 45-year lows at its next policy meeting on Jan. 27-28, and for some time after that.
”The good news is that there is absolutely no pressure on the Fed to raise rates any time in the foreseeable future,” said Edgar Peters, chief investment officer, Panagora Asset Management Inc.
The Labor Department said there were 433,000 ”discouraged” workers in December who were not looking for work because they believed no jobs were available, up from 403,000 a year ago. The jobless rate had been forecast to hold steady at 5.9 percent.
Economists had been expecting a more robust rise in payrolls, encouraged by a reasonable holiday shopping season and a drop in filings for jobless benefits in December.
However, the report showed retailers cut payrolls by 38,000, which the department said was caused by general merchandise stores taking on fewer workers than usual.
The troubled manufacturing sector failed to break its job-cutting trend, shedding 26,000 jobs in December, the 41st month of declines. Some economists, pointing to recent data suggesting a turnaround in manufacturing, had predicted factories would finally take on new workers in December.
In another bad sign for job seekers, the number of hours worked per week dropped to 33.7 from 33.9 in November. The average workweek had been expected to climb to 34.0 hours. Employers often increase the amount of hours worked by existing workers before taking on new hires.
Economists say productivity gains have helped speed up economic growth but allow companies to raise output without creating new jobs.
One bright spot in the report was hiring in construction, which was up 14,000. The building industry has boomed as low mortgage rates have fueled home buying.