Jobless rate falls to 5.2 %
Economy adds fewer positions than expected
The US economy generated new jobs at a disappointing pace in January, but created just enough to push payroll employment to a record high and spare President Bush from joining Herbert Hoover as the only president to end a term with net job losses.
The Labor Department reported yesterday that employers added just 146,000 jobs last month, slightly fewer than the 150,000 or so economists say is needed just to keep up with the natural growth of the labor market. The unemployment rate fell to its lowest level in three years, but the slide to 5.2 percent from 5.4 percent in December appeared driven by frustrated workers giving up job searches so they are no longer counted as unemployed.
The January report pointed to other lingering problems, in labor markets, including the loss of 25,000 manufacturing jobs, a shortening of the average workweek, and slow wage growth.
Although the weaker-than-expected report disappointed economists, it helped cheer investors, worried that a sudden surge in job and wage growth would force the Federal Reserve to raise interest rates aggressively to head off inflation. The Dow Jones industrial average jumped 123.03 points to 10,716.13. The technology-heavy Nasdaq Composite index rose 29.02 points to 2,086.66.
With January's payroll growth, the nation finally regained all the jobs lost in the last recession, and surpassed the previous employment peak of February 2001 by 27,000 net jobs. The tortuous labor market recovery was the longest since World War II, requiring 46 months to reach the prerecession peak, compared to 31 months in the early 1990s and the postwar average of 22 months.
Bush, meanwhile, ended his first term with 119,000 more jobs than when he took office in January 2001. Recently inaugurated for a second term, Bush spent much of last year's presidential campaign fending off attacks on his economic policies, which Democrats predicted would place him with Hoover as the only presidents to end terms with net job losses.
With that fate avoided, the Bush administration hailed the January employment report as evidence of the continuing strength of the economy and steady pace of job creation." In a statement, Treasury Secretary John Snow said, "Today's report again demonstrated the strength of our economic momentum."
Democrats on Congress's Joint Economic Committee, however, noted in a statement that job growth in Bush's first term -- a mere one-tenth percent -- was the worst since Hoover presided over the Great Depression.
In a separate statement, Senator Edward M. Kennedy, the Massachusetts Democrat, said the Bush recovery "has the worst job-creation record of any since World War II." In addition, he charged that jobs lost in the recession have been largely replaced by "low quality" jobs that pay much less.
Many economists disagree that the new jobs are necessarily "low quality," but the US labor market is nonetheless continuing the decades-old shift from manufacturing to service jobs. Manufacturing still has 2.7 million fewer jobs than the previous US employment peak in February 2001.
Thomas Duesterberg, president of Manufacturers Alliance/MAPI, an industry-financed research group in Arlington, Va., said part of manufacturing's recent problems are due to weaker European and Japanese economies, which have hurt demand for US exports. Meanwhile, manufacturers are meeting much of any additional demand by increasing productivity, instead of hiring new workers, a trend certain to continue.
"We're probably not going to get back those 2.7 million manufacturing jobs," said Duesterberg, "probably less than half of them."
Job growth, meanwhile, is coming from sectors such as education and health services, financial activities, and professional and business services. Educational and health services has added 1.8 million jobs since February 2001, while financial services employment has grown by 369,000. Professional and business services, which includes technology firms, has yet to regain all the jobs lost in the recession, but has added nearly 540,000 in the last year, including 25,000 in January.
John Silvia, chief economist at Wachovia Corp. in Charlotte, N.C., said these sectors, each of which pays higher average wages than manufacturing, are likely to provide the jobs of the future. But, he added, they tend to require college degrees and computer literacy.
Economists, who had expected much stronger growth in payrolls, characterized January's job growth as just enough to keep the expansion going.
"This is not a great way to start the year," said Denis McSweeney, regional commissioner of the Bureau of Labor Statistics, "but at least the economy continues to generate jobs."
Robert Gavin can be reached at rgavin@globe.com. 