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Job Growth Anemic in February
Reuters Friday March 5, 4:45 pm ET
By Tim Ahmann
WASHINGTON (Reuters) - The U.S. economy added a paltry 21,000 jobs last month, according to a surprisingly weak government report on Friday that turned up the heat on President Bush as he seeks re-election.
The February jobs report from the Labor Department was the latest in a string that have fallen far short of expectations, dashing hopes employment would soon turn decisively higher.
"The job market is stuck in a cycle of inertia," said John Challenger, head of the outplacement firm Challenger, Gray & Christmas. "The fact is, we are going to have to get used to slow job creation in this country."
The details in the report were uniformly bleak.
Private-sector employment showed no gains. Government hiring was the only reason the nonfarm payroll count rose.
In addition, job creation in December and January was weaker than previously thought, by a combined 23,000 jobs.
While the unemployment rate held steady at 5.6 percent, that was only because many people stopped looking for work. Employment as measured by a survey of households plummeted.
Chris Low, chief economist at FTN Financial, said the report was "unambiguously ugly." Joel Naroff of Naroff Economic Advisors called it "terribly disappointing."
Wall Street firms had forecast a February gain of 125,000 jobs and the market reaction was swift and sharp.
The dollar weakened against most currencies and U.S. Treasury bond prices shot up, sending interest rates down sharply, on the view the Federal Reserve would hold borrowing costs steady for a long time.
In the stock market, expectations of steady interest rates helped temper concern over the lack of jobs. The blue chip Dow Jones industrial average closed up 7 points at 10,595, but the tech-heavy Nasdaq Composite Index dipped 7 points to 2047.
Economists warned consumer spending could falter, once a burst of tax refunds was spent if jobs did not turn up.
"The risk of an economic slowdown later this year has increased, persuading businesses to be extra cautious about hiring people," said Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis.
JOB LOSS POLITICS
Democrats reacted almost as swiftly as the markets, blasting Bush for the 2.2 million jobs lost on his watch.
"At this rate the Bush administration won't create its first job for another 10 years," Democratic presidential candidate John Kerry said in a written statement.
The Bush administration released a forecast last month that looked for average job growth of about 300,000 a month this year -- a forecast that looks increasingly pie-in-the-sky.
"The numbers ... reinforce our view that it would be a terrible mistake to raise taxes on American families and American businesses that are working to create jobs," Treasury Secretary John Snow said, referring to Kerry's proposal to roll back tax cuts for the wealthy.
An average of just 42,000 jobs have been created each month in the last three months, down from the 79,000 average of the prior three months. Economists say gains near 150,000 are needed each month just to keep pace with labor force growth.
In addition, the report showed pay gains have slowed, while the average length of time workers who had lost jobs stayed unemployed climbed to its highest level since January 1984.
Construction employment tumbled 24,000 in February, while the factory sector shed 3,000 workers, the 43rd straight monthly drop. The service sector also proved unexpectedly weak, creating just 46,000 new positions.
Economists were hard-pressed to explain why job growth had fallen far short of expectations yet again, although some said poor weather may have played a role. For the most part, however, they cited the ability of businesses to boost output without taking on new workers.
Analysts said the Fed would not bump up overnight interest rates from their current 1958 low of 1 percent until robust jobs creation finally takes root.
A Reuters poll on Friday of 23 major Wall Street firms found six had pushed back their rate-hike forecasts. Ten firms expect the Fed to sit tight until next year and six expect no increase until the fourth quarter of this year. Only one clung to call for a June hike, down from four in an earlier poll.
Some economists said the relative dearth of hiring more than 27 months into an economic recovery was unprecedented.
"We are in uncharted territory," said David Rosenberg, chief North American economist at Merrill Lynch.
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