WASHINGTON -- The economy generated an anemic 21,000 jobs in February, well below expectations, ensuring that the nation's "jobless recovery" will remain a dominant theme in the presidential campaign.
The few jobs that were created came entirely from the US government, said the Labor Department in its monthly payrolls report, given the flat rate of new hires in the private sector. Unemployment held steady at 5.6 percent, according to the data, as the civilian labor force shrank by 392,000.
"This is a terrible number," said Sung Won Sohn, chief economic officer at
Democratic leaders in Washington targeted the White House in response to the report's figures, which came in well below the estimates of 125,000 new jobs. Late last month, the Bush administration was forced to back away from its own economic forecast, which estimated an average monthly payroll growth of nearly 300,000 for the rest of the year.
In a statement issued from his Washington, D.C., campaign headquarters, Senator John F. Kerry of Massachusetts, the presumptive Democratic nominee for president, said the latest employment figures show that President Bush has "overpromised and underdelivered" on job growth.
"Today's jobs numbers show how far we are from any of the president's promises being kept," Kerry said in the statement. "Every new job created this month was for government employees. There were zero private-sector jobs. At this rate, we won't dig ourselves out of the jobs hole George Bush has gotten us into for almost a decade."
Economists attribute the sluggish rate of new hires to rising productivity levels -- a byproduct of the recession that began in March 2001 and has forced employers to do more with less. According to the prolabor Economic Policy Institute, the economy has generated 294,000 jobs since Bush's tax cuts went into effect in June 2003, a fraction of the 2.5 million jobs the administration projected the economy would generate by February 2004 if the tax cuts passed.
The Bush administration yesterday defended its election-year push to make those tax cuts permanent as the economic stimulus that would eventually fuel robust employment.
"These numbers certainly aren't satisfactory," Treasury Secretary John Snow told CNBC. "But there is no doubt of the fact that if the economy keeps growing, we'll see stronger job growth in the future."
Snow cautioned against growing pressure to penalize companies that are relocating their manufacturing and service operations overseas to reduce costs. Though jobs shifted abroad account for a tiny share of total employment, "offshoring" has become a key issue in an election year and one the Democrats are raising with increased vigor against the White House.
"The two worst things we could do now is raise taxes on business that create jobs and close ourselves off from the world," Snow said.
Though yesterday's report capped a week's worth of bullish economic indicators, there was little in it to hearten the Bush administration. The number of jobs created in January was revised downward, from 112,000 to 97,000, and in December, from 16,000 to 8,000. Over the past three months, the number of new jobs has grown at an average monthly rate of 42,000, well below the 150,000 or so needed to absorb new entries into the labor market.
Wages continue to lag the rate of inflation; on annual basis, hourly wage growth rose by only 1.6 percent, the lowest level since the data were first collected in 1964, said economists.
Economists contended, however, that the jobless rate is bound to recover so long as the economy continues to gain steam. The economy grew by an average rate of 6 percent in the second half of the past fiscal year and is expected to grow by at least 4 percent this year. Consumer demand, manufacturing activity, and new construction are surging according to data unveiled this week, and earnings continue to show strong gains among corporations that survived the economic downturn by pairing costs.
Stock investors, who tend to focus more on corporate earnings than unemployment, shrugged off yesterday's report. The Dow Jones industrial average ended at 10,595.55, up 7.55 points, while the price of US Treasury bills rose and the dollar lost value as the dismal jobs picture made unlikely the prospect of an interest-rate increase soon.
Manufacturing companies, which have led the downsizing trend in the past several years, are forecasting net job growth within the next month or two. The sector lost an average of 12,000 jobs each month for the last three months, compared with 32,000 in the last half of 2003 and 64,000 in the first half.
"The pressure has been very much on the cost side," said Paul Quinsee, managing director of the US equities division of JP Morgan-Fleming Asset Management. "Sooner or later, strong cash flow will translate into new hiring. The preconditions for a jobs recovery are there, and the pendulum is beginning to swing, though it's hard to forecast when we'll see a full jobs recovery."
Stephen J. Glain can be reached at firstname.lastname@example.org.