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Job growth slows raising new concerns { October 9 2004 } Original Source Link: (May no longer be active)
http://www.latimes.com/business/la-fi-jobs9oct09,1,14921.story?coll=la-headlines-businesshttp://www.latimes.com/business/la-fi-jobs9oct09,1,14921.story?coll=la-headlines-business
THE NATION
U.S. Job Growth Slows, Raising New Concerns
Weaker-than-expected numbers heighten the debate over the strength of the recovery. Bush and Kerry use the data to promote their views.
By Bill Sing
Times Staff Writer
October 9, 2004
The nation's economy added a weaker-than-expected 96,000 jobs in September, the Labor Department reported Friday, raising new concerns about the recovery's strength while sharpening campaign rhetoric about President Bush's economic record.
The net job increase, lower than the 150,000 gain expected by economists, followed a revised boost of 128,000 nonfarm jobs in August. September marked the fourth straight month of relatively weak employment growth after three robust months. Unemployment remained unchanged at 5.4%, in line with expectations.
The government also revised upward, by 236,000 jobs, its preliminary estimate for job creation in the 12 months that ended in March. But that revision, subject to final modification in February, still leaves President Bush with an estimated net drop of 585,000 jobs during his term.
Barring a dramatic hiring surge by year's end, Bush is on track to become the first president since Herbert Hoover to preside over a net job loss.
Democratic presidential candidate Sen. John F. Kerry quickly seized on the job report — the last before the Nov. 2 election — as further evidence of what he says are the weaknesses of Bush's economic stewardship. Democrats noted that the latest gain was less than the net 150,000 new jobs that analysts say are needed each month simply to absorb population growth and keep unemployment levels steady.
"Today, we received another disappointing jobs report for America's workers," Kerry said.
To boost jobs, Kerry during Friday night's debate reiterated his proposals for tax cuts rewarding companies that hire workers in the United States, while reducing tax incentives that encourage outsourcing to other countries.
President Bush and administration officials countered, saying the job report — although not as strong as hoped for — nonetheless showed a growing economy that has added a net 1.8 million jobs in the last 13 months, with a jobless rate now lower than the 5.8% average during the 1990s. The economy's annualized quarterly growth rates for the last year have equaled or surpassed the 3.3% average growth of the last four decades.
The report "shows the steady creation of jobs fueled by the pro-growth policies and strong economic leadership of President Bush," Treasury Secretary John W. Snow said.
Bush says his tax cuts have stimulated a job market that could have been much worse after the 2001 recession and terrorist attacks and the collapse of the 1990s tech and stock bubble.
Investors saw the report as bad for stocks but good for interest rates. The stock market, which already had fallen Thursday amid worries of a disappointing job report, tumbled further Friday. The Dow Jones industrial average dropped 70.20 points, or 0.7%, to 10,055.20.
But bond yields declined sharply on the belief that a sluggish job market could reduce inflationary pressures — in turn giving the Federal Reserve leeway to slow its pace in raising short-term interest rates.
Most economists still expect the Fed to hike its benchmark rate by another quarter-point, to 2%, at its next meeting Nov. 10. But the central bank may now refrain from raising rates again at its Dec. 14 meeting and into early next year, some analysts suggested.
"The Fed would be well- advised not to raise interest rates further," said University of Maryland economist Peter Morici.
The job report heightened the debate among analysts about whether the economy was rebounding from the soft patch it hit during the summer, when high gasoline prices ate into consumer spending.
Recent data showing stronger consumer and business activity had prompted some experts recently to raise growth forecasts.
But Friday's report offered some warning flags. The number of potential workers participating in the labor force fell by 0.1 percentage point to 65.9% as frustrated job seekers gave up searching for employment. The private sector added 59,000 positions, and government accounted for 37,000 of the net new jobs.
Manufacturing employment declined by 18,000 after two straight months of gains. Temporary jobs rose by 33,000 amid a continuing reluctance to hire permanent workers.
The Labor Department also said the Florida hurricanes were not a major factor in the latest job numbers — taking away an excuse for the disappointing results.
Most broadly, the four-month string of relatively weak job numbers renewed concerns about whether the economy was undergoing deep structural changes that inhibit job growth.
History suggests that an economy growing at 4% three years into a recovery should be producing more jobs. Meanwhile, large corporations are posting strong profit increases and hold high levels of cash. Surveys show employer optimism about hiring.
But labor-saving technologies and changing management techniques are allowing employers to get more productivity out of workers. At the same time, high costs for healthcare and other benefits, along with intense competition from low-cost foreign rivals, are making employers cautious about hiring.
What's more, uncertainties surrounding the election, Iraq, oil prices and interest rates "are causing some businesses to sit on the sidelines," said Sung Won Sohn, chief economist for Wells Fargo Banks.
The weak job market isn't helping workers get bigger pay raises. September's 0.2% increase in average hourly earnings, up 3 cents to $15.78, was below the rate of recent months.
Wage growth stands at 2.4% over the last year, not enough to keep up with inflation in each of the last five months, said Bernard Baumohl, director of Economic Outlook Group in Princeton, N.J.
The Labor Department's estimate of job growth in August was revised downward, by 16,000 positions, from the 144,000 initially reported. But job growth for July was revised upward, to 85,000 from 73,000.
Eight million people were unemployed, down 19,000 from August. Total employment fell by 201,000 to 139.5 million.
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