[several other articles below]
Employers added only 1,000 new workers to the nation's payrolls last month, the Labor Department reported today [Employment Situation December 2003 - US Department of Labor 9jan04], providing further evidence that the economic recovery is continuing to elude the labor market.
The stagnation in job creation occurred even though the nation's unemployment rate fell to 5.7 percent in December from 5.9 percent in November.
The weak labor market called into question other measures, like weekly unemployment claims, that had suggested a firming jobs picture in December. And it came as a major surprise to most economists. Before the release of the employment figures, the consensus estimate on Wall Street projected an increase of 150,000 jobs in nonfarm payroll employment.
"There are structural impediments to new job creation," William V. Sullivan, a senior vice president at Morgan Stanley, said on CNBC this morning shortly after the figures were released. "Those impediments remain as 2003 came to a close. Everybody has to be disappointed with these numbers."
Not only was the December jobs number weaker than expected, but the Labor Department also revised downward the gains reported in October and November.
As a result of the revisions, payroll employment grew by 43,000 jobs in November, down from 57,000 as originally reported. The October gain was revised down to 100,000, from 137,000 previously.
In a message to clients after the release of the job numbers, David Rosenberg, chief economist at Merrill Lynch, noted that with the revisions the economy had failed to generate more than 100,000 jobs for 11 straight months.
"This is a streak that has never happened before, outside of recessions, at any time over the past 50 years, Mr. Rosenberg wrote."
He added that at this stage of an economic expansion, the "typical" monthly increase in payroll employment is 145,000.
President Bush expressed mixed feelings about the latest jobs figures. "That's not good enough," he told a group of businesswomen in a gathering at the Commerce Department. "We want more people still working. But nevertheless, it is a positive sign that the economy is getting better."
He added: "I know what we have overcome in this country. I mean, this economy has got to be pretty darn strong to have come through what this nation has come through."
On the surface, the drop in the unemployment rate looks like good news. But the lower number is due to the fact that the overall labor market shrank by 309,000 workers in December, the government said.
The decline in the labor market pushed the labor force participation rate, which measures the number of people who work as a percentage of the overall labor force, to its lowest level since August 1991.
Recent data from organizations like the Institute of Supply Management have suggested that hiring in the manufacturing sector is starting to take place. But the data released today belie that notion.
Manufacturing employment, which has been falling for more than three years, declined by another 26,000 jobs last month. And the nation's retailers, who normally add jobs in December to cope with the holiday sales season, instead shed 38,000 employees.
The weak employment report encouraged bond traders, who saw it as another sign that the Federal Reserve would not be in a hurry to raise short-term interest rates any time soon. Prices of Treasury securities rose and interest rates fell. By this afternoon, the Treasury's benchmark 10-year note was up more than a point in price, while its yield, which moves in the opposite direction, declined to 4.11 percent from 4.25 percent late Thursday.
The stock market, meanwhile, was disappointed by the December jobs report. All three major market averages fell in early trading, although they later recovered some ground. By this afternoon, the Standard & Poor's 500-stock index was trading down 3.22 points, or 0.3 percent, to 1,128.70.
Analysts said the job figures once again underscore continuing trends like outsourcing and labor-saving technological gains. Those trends, while greatly enhancing productivity, suggest that much faster economic growth will be needed to generate a meaningful increase in employment.
"If you want to make a real dent in unemployment, you are going to need more than 4 percent growth in the economy," said Robert v. DiClemente, chief economist for the United States at Solomon Smith Barney. "In a very uncertain world, companies are reluctant to make commitments."
Those that do have jobs are not seeing wages go up very much.
Average hourly earnings rose just 0.2 percent in December, the Labor Department said. On a year over year basis, wages rose by 2 percent in December.
On CNBC, Mr. Sullivan from Morgan Stanley said the year-over-year increase in wages was the lowest since 1987. Once again, the number of temporary employees rose in December.
"The trend toward contract employment is here to stay," said David Wyss, chief economist at the Standard & Poor's Corporation. "In part, that's because people like it. But it is also because employers are trying to control rising health care costs."
The Department of Health and Human Services reported that spending on health care shot up 9.3 percent in 2002, the largest increase in 11 years, to 1.55 trillion dollars. Hospital care and prescription drugs accounted for much of the increase.
Analysts said the job figures — both new and revised — would not alter their fourth-quarter growth forecast. Most economists project the economy expanded at a better than 4 percent rate in the last three months of 2003.
Still, they acknowledged that the jobs report provides little or no reason to policy makers at the Federal Reserve to alter their current stance on monetary policy.
The overnight federal funds rate, the rate the Fed most closely controls, is likely to stay at its current level of 1 percent for many more months, the analysts said.
Members of the Fed's policy-making Open Market Committee are scheduled to hold two days of meetings Jan. 26 and 27.
"The Fed would like to see more employment growth," said Ray Stone, a managing director at Stone & McCarthy Research Associates, an economics consulting firm in Princeton, N.J. "These numbers have to be a disappointment."
The jobs figures also leave a potentially potent political issue on the table for Democratic candidates in the run-up to upcoming presidential caucuses and primaries.
"The modest job growth of the last few months pales in comparison to the number of jobs lost under Bush's watch — 2.3 million — and falls far short of the president's promise last year that his tax cuts and economic program would generate more than 300,000 jobs a month," John Sweeney, president of the AFL-CIO, said in a statement.
source: http://query.nytimes.com/mem/tnt.html?tntget=2004/01/09/business/09CND-JOBS.html&tntemail0=&pagewanted=print&position= 9jan04
FOREIGN EXCHANGE
NEW YORK -- The dollar plunged to new lows Friday, with fragile sentiment toward the beleaguered currency dealt a further blow by a surprisingly weak U.S. employment report.
The dollar began sinking as soon as the data showing that only a 1,000 jobs were added to non-farm payrolls last month hit the wires. Economists had expected a rise of 150,000, with most expecting the balance of risks to the upside.
The unemployment rate may have fallen to a 14-month low of 5.7% from 5.9%, but the alarming lack of job creation spooked investors. Treasury and gold prices rallied, while bond yields and stocks plummeted.
The main drag for the dollar is the impact a weak labor market has on interest rates, because expectations of rates staying low mean the dollar will likely remain weak.
The dollar hit new all-time lows against the euro and multiyear lows against virtually every other major and second-tier currency. The exception was the yen, which was relatively weak only because of a massive intervention push by Japanese monetary authorities overnight in Tokyo.
Dealers said the Bank of Japan, on behalf of the Ministry of Finance, bought anywhere between $5 billion and $15 billion in the currency markets Friday, bringing total intervention this week alone to a staggering $40 billion.
The dollar's sharp slide Friday mean it's lost nearly 2% against the euro in the first full week of trading this year alone and more than that against sterling and "commodity currencies" such as the Canadian, Australian and New Zealand dollars, noted Daniel Katzive, currency economist at UBS.
In late trading in New York, the euro was at $1.2835, up from $1.2761 in New York late Thursday. It had peaked at $1.2870, getting closer to the psychological barrier at $1.30. The euro was also up against the yen at ¥136.65 from ¥135.55.
The dollar was at ¥06.40, up from ¥106.17, but almost right back where it was before the intervention-led rally in Asia from Japanese monetary authorities sent the dollar soaring two yen to a four week-high of ¥108.29.
The fact the dollar has given back nearly all these gains is "really, really bad for the dollar," said a new York-based dealer at a Japanese bank. He warned of the potential for further intervention from the BOJ Monday, when Japanese markets are closed for a public holiday. The relatively illiquid trading conditions could exaggerate the impact of any intervention, he said.
The dollar ended lower Friday against the Swiss franc at 1.2200 francs from 1.2261 francs late Thursday, but off its new seven-year low of 1.2169 francs. The pound was sharply up at $1.8480 from $1.8353, hovering around its new 11-year high of $1.8488 printed earlier Friday.
The dollar slid to a new 11-year low against the Canadian dollar of C$1.2685 against C$1.28 late Thursday before recovering a little to C$1.2705.
Strong Canadian jobs data -- the economy added 53,00 jobs last month -- fueled the rally.
Dealers reported extremely choppy and nervous trading in foreign exchange markets Friday, hardly helped by yet more reports of technical glitches in the EBS electronic trading system. Volumes were good and the range of players wide. European and Asian central banks were active participants, particularly selling euros from $1.28 and upward, dealers said.
The U.S. economy, however much it continues to recover and grow, simply isn't producing jobs with the consistency needed to strengthen a labor market weakened by the 2001 recession and undermined by the nation's higher productivity. The Labor Department said today that the unemployment rate fell to 5.7% in December1 from 5.9% a month earlier, but only because so many discouraged unemployed people left the work force. And it said nonfarm payroll totals grew by just 1,000 new jobs, a statistical blip, to 130,124,000.
Both the unemployment and payroll numbers came as a big shock to many economists, who expected a swarm of other positive economic data reported last month to translate into renewed hiring. Instead, the government's survey of businesses found that payrolls of goods-producing industries fell by 12,000, with an increase in construction jobs more than offset by a loss of 26,000 manufacturing jobs, making December the 41st consecutive month of diminished factory employment. Employment in retail trade businesses fell by 38,000, and the department blamed weak hiring for the holiday shopping period. The average workweek for nonsupervisory workers decreased by two-tenths of an hour to 33.7 hours, another bad sign because longer work weeks suggest employers will need to take on more workers in the future. And the department said the labor participation rate fell to 66%, the lowest since August 1991, with 433,000 people now saying they had quit looking for work because they no longer believe a job exists for them.
Employment, of course, is the most politicized sector of the economy, and with the election year now underway, the Bush administration has gone to great lengths to emphasize it is trying to reverse the loss of some 2.3 million jobs since the president took office. Today, Mr. Bush called the drop in the unemployment rate "a positive sign that the economy is getting better," though he said it is not good enough. He seems to be right that the economy is growing, if perhaps not as fast as it was during the third quarter of last year. We have seen a host of economic reports -- from rising factory activity to replenished inventories to the improved earnings of corporate America. But with an apparent lack of confidence preventing companies from beefing up their payrolls, and increased productivity allowing them to do so, it raises the old question: Does economic progress mean greater national output, or an economy that securely employs the people it comprises?
The Federal Reserve provided its own answer to that question last month when it cited the economy's slack resource use as one of the reasons it is keeping interest rates so low in spite of what it described as the country's brisk economic output. With employers still reluctant to hire and under no apparent pressure to do so, and with inflation still low, predictions for a year without an increase in interest rates aren't looking as far-fetched as they once did.
Prior to Friday's employment report, economists had been under the impression that the labor market was improving, albeit slowly. But when December payroll growth came in 149,000 jobs short of what they'd expected (see article), many were caught off guard. Here's what economists had to say about the report and the outlook for the labor market:
|
To
send us your comments, questions, and suggestions click
here |