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Growth in U.S. Payrolls
Is Slower Than Expected
A WALL STREET JOURNAL ONLINE NEWS ROUNDUP
WASHINGTON – U.S. employers added far fewer jobs to their payrolls last month than economists had expected, casting doubt on the momentum of the labor market's recovery.
Nonfarm business payrolls grew by 21,000 jobs in February, down from a revised 97,000 a month earlier, the Labor Department reported Friday. The unemployment rate held steady at 5.6%.
Economists had been expecting payrolls to grow by 125,000 jobs and for the unemployment rate to rise to 5.7%, according to a survey by Dow Jones Newswires and CNBC.
"Employers are still very, very cautious about adding bodies,'' said a disappointed Bill Cheney, chief economist at John Hancock. "If you are out there looking for a job, this is bad news.''
Indeed, thousands of workers gave up looking for jobs. The labor-force participation rate plunged to a 15-year low of 65.9% amid a "steep" dropoff in the number of men in the work force, the department said. Approximately 392,000 people left the civilian work force during the month.
Economists noted a variety of other factors behind the drop in payrolls, including increased productivity and severe winter weather.
"Job creation continues to be surprisingly anemic given the strength of economic activity. This, of course, suggests that productivity continues to increase solidly," wrote Steven Wood, chief economist at Insight Economics, in a note to clients.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, noted that the report "appears not to mention the weather as a factor depressing payrolls but we think it was very significant – remember jobless claims rose 29,000 in the two weeks before the payroll survey, blamed on the weather by the Labor Department. And the details show a big hit in the most weather-sensitive sector, construction."
Construction payrolls declined by 24,000, manufacturing payrolls dropped by 3,000, and the leisure and hospitality industry shed 9,000 jobs.
Among the sectors that saw job growth: the service industry added 46,000 jobs, which included a 10,000 increase in professional and business-services jobs and a 13,000 increase in retail.
The U.S. economy, as measured by gross domestic product, expanded by a robust 4.3% in 2003, and many forecasters say the rate could reach 5% in 2004. But employers have yet to start hiring workers at a 200,000-a-month pace that economists say is necessary to replace the 2.3 million jobs lost since 2001 and find work for new entrants into the labor market. Since August, nonfarm payrolls have grown at an average rate of just 60,700 a month.
Federal Reserve policy makers, under the circumstances, aren't expected to raise rates quickly, even though Fed Chairman Alan Greenspan says the central bank will eventually have to raise its target for the federal-funds rate from its current 45-year low of 1%.
Indeed, the fed-funds futures contract for a quarter-point rate increase at the Fed's September meeting plunged to a 60% chance after the payrolls report was released from 100% at Thursday's close.
In its report Friday, the Labor Department revised its estimates of job growth for January and December, saying employers added fewer jobs than previously thought. Nonfarm payrolls grew just 97,000 in January, down from the initial estimate of a 112,000 gain. Payrolls growth was a mere 8,000 in December, half the previous estimate.
Average hourly earnings rose three cents to $15.52; the average work week held steady at 33 hours and 48 minutes.
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