Economy adds fewer jobs than expected
WASHINGTON -- The US economy generated 112,000 new jobs in January, its strongest monthly performance in more than three years. But the figure was lower than economists had expected, leaving President Bush vulnerable to Democratic criticism of his economic policies.
The January job gain was the fifth straight monthly rise and a dramatic increase from December's 16,000 figure, which itself was revised upward from 1,000.
Economists said, however, that the rate of job growth is still well below the level needed to match the number of new workers entering the market. Many economists had expected the January number to come in at about 150,000, based on the strength of the country's economic recovery. They also cautioned that the decline in the unemployment rate, from 5.7 percent in December to 5.6 percent in January, reflected the growing number of the nation's jobless opting out of the labor market altogether.
The numbers are "going in the right direction, but they're still subpar," said Wayne Ayers, chief economist for FleetBoston Financial Corp. "Not only for this month, but in general. The recovery has yet to translate into respectable job growth."
Stock and bond markets were buoyed by the good-but-not-great numbers. The Dow Jones industrial average was up 97.48 points, or 0.93 percent, to close at 10,593.03. Analysts said the modest job growth reinforced the notion that the Federal Reserve will not have to worry about an overheating economy and will continue to hold interest rates low.
"The economy is strong enough to give us good earnings numbers, but the job growth and inflation numbers aren't high enough to cause the Fed to act," said Joseph Veranth, who helps oversee $2 billion at Dana Investment Advisors in Brookfield, Wis. "That's good news for the stock market."
Bush's critics seized on the lower-than-expected job totals as proof his tax cuts have failed to trigger employment growth. Sluggish employment rates have become a key issue in the presidential campaign among both blue- and white-collar workers, many of whom have seen their jobs eliminated or outsourced.
"This report is a slow boat to China," said Wells Fargo & Co.'s chief economist Sung Won Sohn.
Treasury Secretary John Snow seized on the drop in the unemployment rate and told reporters in Florida that "we're beginning to see a much better tone in labor markets." "We're clearly on the right side of things, and the economy is showing real strength," Snow said.
White House allies also interpreted yesterday's data as a positive, if gradual, upward trend. The Republican-controlled House Budget Committee said January delivered the best monthly job growth in three years and pointed to 360,000 new payrolls added since September.
"The good news is that more and more Americans are back to work," said the House Budget Committee chairman, Jim Nussle, an Iowa Republican. "Our job is not done, however, until everyone who wants a job has a job."
The prolabor Economic Policy Institute concluded in a report yesterday that the current job-creation rate is the slowest on record relative to economic growth and a growing drag on future expansion. It said 296,000 jobs have been created since June, when the tax cuts took effect, well below the 2.1 million new jobs the White House projected would be generated by the trickle-down impact of tax relief.
"We're nowhere near that" 2.1 million figure, said Representative Pete Stark of California, senior Democrat on the Joint Economic Committee. "President Bush is on track to be the first president since Herbert Hoover to end his term with fewer jobs than when he started."
Some 2.2 million jobs have been lost since Bush took office, said Stark. To end his term with a net growth in employment, economists say, the president needs the economy to grow some 200,000 to 300,000 jobs each month to create the 160,000 or so needed to absorb new workers entering the labor market.
Not all the news was bad. The number of average weekly hours worked rose in January to 33.7 from 33.5 in December, which is often perceived as a sign that employers are pressing their existing staff to work harder as a prelude to new hiring. The average hourly wage also rose, to $15.49 from $15.47 the previous month, according to the report.
The retail sector accounted for 76,000 of the new jobs gained in January, according to the report. Economists said the rise was due in part to a decline in the number of holiday-season layoffs in the retail industry because of the relatively small number of employees taken on in November and December. Manufacturing companies posted net losses for the month, although at a slower rate than in previous months, as did white-collar businesses and the civil service. The construction industry produced 24,000 new jobs because of continued lower interest rates that have spurred housing starts and home improvements.
The sluggish jobless rate has generally been attributed to high productivity levels, a byproduct of the recession that forced business owners to do more with less, and the exodus of jobs to lower-wage markets overseas.
Stephen J. Glain can be reached at glain@globe.com. Material from Bloomberg News was used. 