Unemployment Drops to 5.4 Percent
Friday September 3, 3:54 pm ET
By Jeannine Aversa, Associated Press Writer
Payrolls Expand in August; Presidential Candidates Debate Economy As Unemployment Hits 5.4 Percent
WASHINGTON (AP) -- Employers stepped up hiring in August, expanding payrolls by 144,000 and lowering the unemployment rate marginally to 5.4 percent. While the figures didn't amount to a national job fair, analysts said, they did hold out the promise of stronger growth following the summer lull.
The latest snapshot of the employment climate, contained in a Labor Department report Friday, came just about two months before the country votes for a president. George W. Bush, who has the job, sparred with Democratic rival John Kerry on the campaign trail over the health of the economy and the availability of work.
Bush seized upon the report as evidence his policies are working. "It shows that our economy is strong and getting stronger," he told a crowd Friday at a campaign stop in Pennsylvania. "Our growing economy is spreading prosperity and opportunity and nothing will hold us back," he enthused.
But Kerry, stumping in Ohio, said the new figures constituted another example of what he called Bush's "record of failure." The Massachusetts senator added: "I don't think this is something to celebrate. I think it's something to get to work on."
The 144,000 net jobs added to the economy in August -- while slightly less than the 150,000 positions economists were forecasting -- were the most since May and marked the 12th straight month that payrolls grew.
Employment figures for June and July -- still relatively lackluster -- were revised to show a combined 169,000 net jobs were created in those two months -- 59,000 more than previously reported.
"The report suggests the economy is gradually pulling out of its soft patch," said Lynn Reaser, chief economist at Banc of America Capital Management. "It is still difficult to find a job but companies are beginning to selectively look for new hires."
Other business analysts, while still hopeful about future job growth improvements, weren't as certain that the economy was coming out of its summer rut. "The numbers are okay, but the economy is still not firing on all cylinders," said Mark Zandi, chief economist at Economy.com.
Jobseekers have been struggling with a bumpy labor market recovery. There were 8 million people unemployed in August, with an average duration of 19 weeks without work, up from 18.6 weeks in July.
The seasonally adjusted 5.4 percent civilian jobless rate for August was the lowest since October 2001 and down fractionally from July's 5.5 percent rate. The decline, however, came as 152,000 people dropped out of the labor force for any number of reasons.
The Labor Department said that Hurricane Charley, which tore through Florida on Aug. 13 -- had no discernible impact on the employment figures.
Although payroll jobs have grown by 1.7 million in the last 12 months, the economy still has lost 913,000 positions since Bush took office.
Bush says his tax cuts have helped the economy rebound and that making those tax cuts permanent will spur more job creation. Kerry contends that Bush's policies benefit the wealthy, squeeze the middle class and aren't producing significant job growth.
Federal Reserve Chairman Alan Greenspan had said that the economy hit a "soft patch" in June. However, he and his Fed colleagues expressed confidence last month that economic activity would pick up.
Economists want to see at least 200,000 net jobs added a month on a consistent basis before declaring the labor market fully healed.
With job growth improving modestly in August, economists said they think the Fed probably will stick to its gradual approach to raising short-term interest rates. Most economists expect the Fed will boost rates for a third time this year on Sept. 21. A few, however, believe that policy-makers may hold rates steady.
Although analysts expect the economy to grow anywhere from a 3 percent to just over 4 percent pace in the current quarter, some are a bit wary, given that in August retail and automobile sales came in sluggish, consumer confidence dropped and manufacturing activity grew at a slower pace.
The report brought out differing viewpoints on the economy's condition.
"Clearly, we have not turned the economic corner," said John Sweeney, president of the AFL-CIO, noting that "most workers are equally concerned that we've entered an era of declining job quality." But Martin Regalia, chief economist at the Chamber of Commerce, said: "After weathering a brief squall, the economy appears back on track."
Factories added 22,000 jobs in August, up from 6,000 the previous month -- an encouraging sign for a sector that was hardest hit by the 2001 recession and has struggled mightily to get back on firm footing.
Employment at professional and business services expanded last month as did jobs in the education and health care industries. But retailers in August shed workers for the second straight month. Employment at telecommunications companies and in transportation dipped.
Average hourly earnings rose to $15.77 an hour in August, up 2.3 percent from the same month a year ago. Economists were hopeful that would help support consumer spending, the economy's lifeblood.
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