OT In light of how badly the economy continues to do, it will be impossible to sustain a longterm, longrange, unpopular war in which the US goes it alone...
U.S. Economy Shows Unexpected Weakness as Jobs Decline
By KENNETH N. GILPIN
nytimes.com
In a clear sign that the economy is stalling, the Labor Department reported today that the nation's payrolls fell for a second straight month in December.
But the decline, which was largely concentrated in the retailing and manufacturing sectors, was not enough to move the unemployment rate, which remained unchanged at 6 percent.
Employers shed 101,000 jobs outside the farming sector in December, the department said, defying Wall Street's expectations for modest job growth. And the number of jobs lost in November was revised upward to 88,000, from a previously reported decline of 40,000.
The total number of unemployed people remained essentially flat at 8.6 million.
The job losses in December were the biggest in 10 months.
David Resler, chief economist at Nomura Securities International, called the statistics "profoundly disappointing."
"They tell us we are still waiting for the economy to kick in enough for companies to start hiring," he said.
Indeed, the report was so weak that Mr. Resler said he might be forced to reduce his projections for fourth-quarter economic growth. Up to now, he was forecasting a paltry increase of 0.5 percent.
"These numbers say I might have the right number but the wrong sign," he said.
Bond prices initially rallied after the December employment figures were released, but they later gave up most of their gains. Shortly before midday, the Treasury's benchmark 10-year note was trading up marginally, as its yield remained unchanged at 4.17 percent.
Stocks, meanwhile, recovered from early losses. The Dow Jones industrial average was trading up 9.05 points, or 0.1 percent, to 8,785.23 shortly before midday. The Standard & Poor's 500-stock index was 2.85 points, or 0.3 percent, to 930.43. And the Nasdaq composite index was up 12.43 points, or 0.9 percent, to 1,450.89.
Manufacturing employment fell by 65,000 in December, the 29th consecutive decline. But those who remained on the job worked slightly longer hours. Over the course of the last 12 months, the nation's manufacturers have cut nearly 600,000 jobs.
"If you are digging hard for good news, the fact that the factory workweek went up slightly is one nugget," said Ethan Harris, chief United States economist at Lehman Brothers.
"But it's impossible to put a positive spin" on the report, he added.
"I think the general take on the economy should be that after a long series of shocks, corporate America is in a slow growth or no-growth mode, and needs a shock itself."
Analysts said the employment report was almost certain to ratchet up debate in Congress about the size and composition of an expected economic stimulus package.
On Monday, Democrats attempted to counter the White House's plans by proposing a $136 billion package of tax cuts and aid to fiscally strapped state and local governments that would be almost immediately be injected into the economy.
The next day, President Bush formally unveiled his $674 billion package of tax cuts and other economic measures. But the president's desire to eliminate the double taxation of corporate stock dividends accounts for nearly half of the total package. The short-term impact of his dividend proposal, if it is enacted, is difficult to gauge, economists said.
"I agree with the Democratic plan much more than the president's," said William Dudley, chief United States economist at Goldman Sachs. "But I would make the Democratic plan a little bigger and extend it into 2004."
Aside from manufacturing, the biggest source of weakness in today's employment report was in the retailing sector.
Typically, retailers add workers in December for the holiday shopping season. But this year was not typical: retailers shed 104,000 jobs.
The cut in jobs helps to explain "why I had to stand in line in so many stores before Christmas," Mr. Resler said. "It wasn't because there were too many shoppers. It was because there were fewer people behind the counter."
Retailers have said that the holiday shopping season just ended was one of the weakest in years.
Because hiring in the retailing sector is very seasonal, analysts said employment is likely to rebound somewhat in January. But conditions in retailing have been weak for months: employment in the sector has been down for five straight months.
About the only bright spot in retailing was in furniture and home furnishing stores, which added 14,000 workers in December. The housing sector was one of the economy's few bright spots last year, in large measure because of low mortgage rates.
Elsewhere, the struggling airline industry helped to drag down employment in the transportation industry, which lost 23,000 jobs in December.
Before the economy starts moving again with any vigor, three things need to happen, Mr. Harris at Lehman Brothers said.
"You need fiscal help, which the Bush plan does in a very expensive way. You also need a resolution of geopolitical problems. And we think the Federal Reserve will cut short-term interest rates again by either one-quarter of a point or a half a point, probably in March."
The Fed last cut interest rates in November, when it lowered its target on the overnight federal funds rate to 1.25 percent, its lowest level in more than four decades.
"You could make a pretty good case the Fed hasn't been vigilant enough," Mr. Resler said. With prices falling in many sectors, "a large segment of the economy is looking at this structure of interest rates and saying they aren't particularly low." |
