Job figures cast shadow over extent of recovery
Job growth slowed sharply in June, the government reported Friday, pulling back from a recent period of strong employment gains and casting doubt about the vigor of the nation's economic expansion.
www.registerguard.com | © The Register-Guard, Eugene, Oregon
July 3, 2004
The Labor Department reported that employers added only 112,000 jobs in June, less than half the average monthly increase of the first five months of the year.
The reported increase, which includes adjustments intended to account for normal season variations, was under the 150,000 threshold of jobs needed for employment to keep pace with natural labor force growth. It was also well below the 250,000 forecast on average by Wall Street economists, who have been consistently wrong about jobs for the better part of the last year.
The unemployment rate, which essentially has not budged all year, remained unchanged from May at 5.6 percent.
``It's pretty clear the economy downshifted in June,'' said Sung Won Sohn, chief economist of Wells Fargo & Co. in Minneapolis.
The renewed weakness in employment provided an unexpected jolt to President Bush's re-election campaign, which has been counting on drawing attention to an improving job market to make the case for its economic policies.
And it offered fresh ammunition for Sen. John Kerry of Massachusetts, the Democratic challenger, whose criticism of Bush's economic track record had been undermined by the fast pace that hiring began setting earlier this year.
Several economists, however, suggested that the sluggish June data may have been a fluke, noting that the payroll report can be very volatile from month to month and predicted that it would rebound in July.
``It will take more than one weak month to convince us that the economy is struggling,'' said Henry Willmore, chief U.S. economist at Barclays Capital.
At the White House, where Bush spoke before a group of small-business owners, Bush sought to cast the new job figures in a positive light.
``The jobs increased by 112,000 in June, which means we've had a total of 1.5 million new jobs since last August,'' the president said. ``To me, that shows the steady growth.''
N. Gregory Mankiw, the White House's chief economic adviser, dismissed the job report as an aberration. He noted that other economic indicators - including consumer confidence and the monthly survey of purchasing managers - still point to a robust economic recovery. ``We should not overweight any specific monthly statistic,'' Mankiw said.
The slowdown in hiring came as Bush's approval rating on economic issues appeared to be improving. In a Gallup poll in late June, 47 percent of respondents said they approved of the president's handling of the economy, up from 41 percent in a similar poll conducted at the beginning of the month.
The Kerry campaign seized on the data, issuing a report highlighting the job market's weaknesses since Bush took office, including a net loss of 1.8 million private sector jobs.
``We've seen three decent job months in the last three and a half years,'' said Jason Furman, the economic policy director of the Kerry campaign, ``but we're still a long way from making up for the millions of jobs lost under President Bush.''
While many economists are confident the economy will maintain a strong pace, various recent signals suggest the recovery may be losing some steam.
Last week, the government trimmed its original estimate of economic growth in the first quarter to 3.9 percent from its initial estimate of 4.2 percent.
Other recent indications of weakness in retail sales, auto buying and durable goods, also hint at a pullback in the economy's strong performance of recent months.
Still, until new evidence emerges, the June employment report left a broad impression of weakness.
Wages of private nonsupervisory workers - which account for some 80 percent of total employment - barely inched up to $15.65 an hour.
That represents a mere 2 percent increase from last year, insufficient to maintain workers' purchasing power against an inflation rate now running around 3 percent.
The average workweek fell to 33.6 hours in June from 33.8 hours in May. As a consequence, weekly earnings for private, nonsupervisory workers actually declined over the month, before accounting for inflation, falling to $525.84 in June from $528.29 in the previous month.
Casting perhaps the broadest pall over the state of the economic recovery, the total index of weekly hours worked in the private sector - which, as a measure of all the hours worked by all the workers employed, provides a good gauge of the overall state of the economy - fell to 99.6 in June from 100.2 in May.
Some previous bright spots dimmed.
Construction, which had added 250,000 jobs over the previous 11 months, stalled. Growth in hotel and restaurant jobs slowed. The brief burgeoning of manufacturing employment was cut short, with the number of manufacturing jobs falling by 11,000, after rising by 24,000 in May.
But even if the slowdown in job creation points to a deceleration in economic growth, the latest figures do not spell an end to the recovery.
``This doesn't mean that the expansion is over,'' said Jared Bernstein, of the Economic Policy Institute, a left-leaning economic research institute. ``But this expansion never has been pure blue sky. This boosts the sense of insecurity about the expansion.''
Indeed, many economists will now be on the edge of their seats, eagerly awaiting the next batch of job figures.
``It makes me worry a bit about the solidity of what up to now looked like a very solid recovery,'' said Alan Blinder, a Princeton economist who is a former vice chairman of the Federal Reserve and now advises the Kerry campaign on economic matters. ``If we get a second weak month, it will really change my view.''
at 5.6 percent
June jobs: 112,000, half the monthly average increase for the past five months
Wages: $15.65 an hour, which
is a 2 percent increase from last year
Construction jobs: Stalled
Manufacturing jobs: Down 11,000 from May
33.6 hours, down from 33.8 hours in May
Total index of weekly hours: 99.6, down from 100.2 in May
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