Some experts skeptical about US economic rebound despite solid data
[11 Nov 2003]
WASHINGTON, (AFP)
The figures show the US economy surged in the third quarter, and job growth is back, but some analysts remain skeptical that the US economy has turned the corner.
Although most economists say the recent reports showing 7.2 percent growth in the most recent quarter and a quarter-million jobs created in the past two months herald a solid recovery, hard-core skeptics say the numbers belie underlying weakness in the US economy.
David Rosenberg, chief North American economist for Merrill Lynch, said a closer look at the data show most employment gains were in low-wage jobs, with incomes barely budging and some key economic sectors left behind.
"We don't mean to dwell on the darker side of Friday's nonfarm payroll report, especially since everyone is dancing around the kitchen table ... (but) we end up being a tad skeptical," Rosenberg said.
Rosenberg said labor market participation is a weak 66 percent, and that although the official unemployment rate rate is 6.0 percent, the "augmented" jobless rate, counting discouraged workers outside the labor force, is 9.0 percent.
"The volume of available labor is still huge," he said.
"We hate to be party poopers, but how can any labor market report be classified as unambiguously strong when the index of aggregate hours worked is down 0.1 percent in construction and down by 0.2 percent in manufacturing."
Many new jobs "have absolutely nothing to do with the economic cycle," such as food service and local government, said Rosenberg.
"It looks as though (former presidential candidate) Ross Perot was right after all -- we've become a nation of burger flippers."
Stephen Roach, chief economist at Morgan Stanley who has been bearish on the economy for some time, was also unimpressed by the latest data.
"While stronger than expected, the latest US employment numbers are hardly in keeping with the vigorous hiring-led upturns of the past," Roach said.
Roach argued that the economy still faces "a cyclical shortfall of close to seven million jobs -- the number of Americans who would have been at work in the private sector had the current hiring recovery conformed to the cyclical norms of the past."
Moreover, Roach said the global economy remains overdependent on the United States, and that the US trade and budget deficits and highly indebted US households make a recipe for a weak situation.
"All in all, the proverbial glass still looks half-empty to me," Roach said. "For a saving-short, overly-indebted, post-bubble US economy, I continue to think it's entirely premature to issue the all-clear sign."
John Challenger, chief executive officer of the employment consulting firm Challenger, Gray and Christmas, also said that job market rebound may not be as strong as the numbers suggest.
"We will need to see the unemployment rate drop for several consecutive months to be able to say that job conditions are improving," he said.
"It will take 100,000 to 150,000 jobs created each month just to keep pace with population growth. An additional 125,000 to 150,000 new jobs each month is what will be necessary to pull us out of the current severe hiring slump."
Drew Matus, economist at Lehman Brothers, said the report on job gains was a welcome surprise for an ailing labor market but argued that the figure was "under what most economists would consider to be the beakeven point for employment, which is the level where the employment rate would stop rising."
"One of the problems ... is that nearly half the gains we've seen in the last two months was due to hiring in temporary services," Matus said.
"Typically those lead a recovery and turn into full-time jobs. However, this time around, because we're so in the early stage of the recovery and businesses are still quite cautious, if for some reason businesses become more cautions in the next two or three months, these jobs might not materialize." |
