Jobs creation report stirs fears
Analysts hint at long summer of recovery losing momentum
indystar.com
From Star news services
July 3, 2004
WASHINGTON -- The economy created just 112,000 jobs in June, half what analysts had expected and far slower than the previous three months. The report raised new misgivings about the strength and endurance of the rebounding jobs market.
The nation's unemployment rate remained at 5.6 percent for a third consecutive month, and big jobs gains in April and May were revised downward by 35,000, the Labor Department reported Friday. June was the 10th straight month of payroll gains, which has restored about 1.5 million U.S. jobs and shrunk overall losses on President Bush's watch to nearly 1.1 million.
Bush defended his economic policies as he seeks a second term. "We're witnessing steady growth," he told a White House audience Friday. "And that's important. We don't need boom-or-bust-type growth. We want just steady, consistent growth, so that our fellow citizens will be able to find a job."
But Democratic challenger John Kerry noted the falloff in jobs growth and said many new jobs don't pay well.
"Don't tell the people getting the second-rate jobs, that are working two and three jobs, that we can't do better," Kerry said Friday at a paper mill in Cloquet, Minn. Job growth was far less than the 250,000 that economists had expected.
"I'm not ready to panic," said Joel Naroff, president of Naroff Economic Advisors. "But clearly the job market is not as strong as we initially thought."
The weaker-than-expected jobs report cast a gloom over Wall Street as investors pondered new questions about the strength of the recovery. The Dow Jones industrial average lost 51.33 points to close at 10,282.83, posting a second straight losing week.
A four-month hiring spree in manufacturing ended last month. Factories cut 11,000 jobs in June after expanding payrolls by 75,000 this year, coming off three years of layoffs.
In a separate report Friday, the Commerce Department said factories experienced decreases in orders in May for the second month in a row as demand for cars and other big-ticket goods declined. The 0.3 percent drop in orders placed with U.S. factories came after a larger 1.1 percent decline in April, the department said.
"There's no question we have lost steam," said Sung Won Sohn, chief economist at Wells Fargo Bank in Minneapolis. "The question is whether we will continue to lose steam or have better economic growth in the future."
More than 900,000 jobs were added in the previous three months, buoying expectations for sizable growth in June. Instead, "the labor market stumbled," said Bill Cheney, chief economist at MFC Global Investment Management.
"This report paints a distinctly weaker picture than we've seen over the past few months and was decidedly weaker than we expected," he said.
An invigorated labor market is what prompted the Federal Reserve to raise interest rates Wednesday for the first time in four years. The quarter-point increase was the first change since the federal funds rate was cut to a 46-year low of 1 percent in June 2003.
Economists said the weak jobs report should keep the central bank on its measured pace of rate increases, with expectations for a quarter-point hike in August instead of a half point.
A rebound in the jobs market is key to America's overall economic health, as more jobs would translate into more income, which is what would keep consumer spending growing. It accounts for two-thirds of the economy, but appears to be growing more slowly. Vehicle sales fell sharply in June, and anecdotal evidence suggests a slowdown in retail sales growth.
Analysts say June's jobs creation rate probably will accelerate, but it isn't likely to match the strength of the previous three months.
More realistic is jobs creation of about 200,000 per month.
"The economy this summer may be a little cooler than we thought it was going to be," said David Wyss, chief economist at Standard & Poor's in New York.
Jobs were added last month in health care, social services, education, retail, hospitality and transportation. Employment in business services also grew, fueled by temporary employment firms. That category has added 306,000 new jobs since April 2003, providing some ammunition to Democrats and others that claim the recent surge in hiring occurred in lower-wage industries that provide no health care and few other benefits.
Some economists agree. The economy is producing a higher share of jobs that pay less than the national average -- 60 percent, compared to the jobs recovery of 1993, when about 54 percent could be considered lower-wage, said Sohn, the Wells Fargo economist.
The Associated Press and Knight Ridder Newspapers contributed to this story. |
