Yesterday, the Department of Homeland Security ratcheted back its
terror alert to "yellow" from "orange." But the nation's job
market is still on "red alert."
The Labor Department reported that non-farm payrolls increased by
a paltry 1,000 jobs in December, far below the 200,000 job
additions that many Wall Street sages were predicting. Not only
was the December report a complete bust, but revisions to the
unemployment reports for October and November stripped away
another 51,000 jobs. Net-net, the economy is only 278,000 jobs
ahead of where it was five months ago.
Trying to find the main reason for December's surprisingly weak
result is like trying to find the main reason why the Detroit
lions lose football games. The report reflected a dispiriting lack
of growth in nearly every industry. Retail employment fell by
38,000, while the manufacturing sector extended its unbroken
string of 42 straight monthly job losses by shedding another
26,000 working stiffs. The latest losses from America's rustbelt
mean that nearly 3 million jobs have disappeared from the
manufacturing sector since the middle of 2000.
Another troubling facet of the December report was the
continuation of a trend we predicted in this column several months
ago: the mortgage industry is shedding thousands of jobs. The
mortgage industry had been one of the very few sectors to expand
payrolls since 2000. But the sting of rising interest rates has
shifted this job-creation engine into reverse.
"Employment in credit intermediation declined for the third
consecutive month," notes the Labor Department's dispatch,
"reflecting the reduced volume of mortgage refinancing. From July
2000 through September 2003, the industry added 251,000 jobs, but
since then employment has fallen by 39,000."
The weak jobs report lit a fire under the bond market, while
incinerating stock prices. In the bond trading pits of Chicago, a
moment of stunned silence followed the release of the unemployment
report. "Traders couldn't decide if the gain of 1,000 jobs was a
joke or a typo," said trader Phil Flynn. Almost immediately,
traders started bidding furiously for bonds of all maturities. The
buying didn't stop until the yield on the 10-year Treasury note
had dropped from 4.25% to 4.10%. |
