Job gain a modest 97,000 in February
A government report Friday showing only a modest gain of 97,000 jobs in February painted a picture of an economy that is growing slowly -- but not slowly enough to prompt many analysts to predict a recession any time soon.
The job increase fell short of 100,000 for the first time since November 2004 and was only half the average monthly gain for 2006, further proof that economic growth isn’t keeping pace with last year.
But an upward revision of 55,000 jobs in the previous two months, coupled with a decline in the unemployment rate to 4.5% from 4.6% in January, suggested that the job market had some resilience that could keep things from getting worse.
Continuing wage increases also could bolster consumer spending and offset some of the effects of a sluggish housing market, analysts said.
Wages, which had remained stagnant even after post-recession job growth resumed in mid-2003, continued their recent climb. That was good news for workers but not for inflation fighters.
Average hourly earnings of production workers rose by 6 cents an hour, or about 0.4%, double the previous month’s rate. Earnings stood at $17.16 an hour as of last month, up 4.1% in the last year. Apart from an identical figure in January, that is the strongest annual wage growth since June 2001, just before the 2001 recession took a bite out of pay.
Construction jobs suffered the biggest hit in February, with a drop of 62,000, the worst performance since 1991.
Analysts blamed the unusually cold weather in much of the country for compounding the effects of the weakening housing market.
Manufacturing employment also continued its relentless march downward.
But the service sector, which accounts for about 80% of economic output, more than made up for the losses in construction and manufacturing. Gains totaled 168,000, distributed throughout the sector.
The stock market initially rallied on the job news -- as many investors feared even slower job growth -- but major indexes ended up nearly unchanged.
Given no clear sense of direction, policymakers seemed likely to stay with the status quo, economists said. That applied particularly to the Federal Reserve Board, whose policymaking Federal Open Market Committee has held its benchmark interest rate unchanged for nine months after raising it steadily for two years.
“The report gives no reason for the Fed to do anything but stick with its extended hold on interest rates,” said Nigel Gault, U.S. economist with research firm Global Insight.
Both major political parties used the figures to advance their agendas.
The White House hailed the figures as demonstrating the benefits of President Bush’s tax cuts, and it urged Congress to make the cuts, most of which expire after 2010, permanent. It said the economy had added more than 7.5 million jobs in the 3 1/2 years since August 2003.
That record still falls short of the recovery from the recession at the beginning of the 1990s. The economy generated 9.3 million jobs in a comparable period when job growth became consistent after February 1992.
Democrats said the economy wasn’t that strong. “Softening job growth combined with high trade deficits are a toxic brew for the American economy,” said Sen. Charles E. Schumer (D-N.Y.), chairman of the Joint Economic Committee.
Schumer referred to a Commerce Department report Friday showing that the trade deficit fell slightly in January but remained at $59.1 billion, compared with $61.5 billion in December.
Although last year’s trade deficit was $764 billion, a fifth consecutive record, trade represented one of the bright spots in the U.S. economy, said Nariman Behravesh, Global Insight’s chief economist. Imports grew in January to a monthly record of $126.7 billion, he said, and he predicted that the deficit would decline this year for the first time since 2001.
Bernard Baumohl, managing director of Economic Outlook Group in Princeton Junction, N.J., said the Labor Department’s job report offered something for everyone -- the most upbeat bulls, the most pessimistic bears and everyone in between.
Baumohl concluded that “this business cycle is far from topping out,” but he acknowledged that the other side could find plenty of ammunition.
Chief among the bearish signs, Baumohl said, is a potential meltdown in the sub-prime mortgage market, which in turn would slow consumer spending, the driver of the current economic expansion. He said the sub-prime lending market was too small an iceberg to sink the entire economy.
But Peter Schiff, president of Euro Pacific Capital and a devout bear, said the ripple effects of a series of failures in the sub-prime market would bring down home values even of the most creditworthy homeowners. That, Schiff said, would lead to reduced consumer spending at best and an escalation in bankruptcies at worst.
It all depends on how you look at the data, Baumohl said. “Instead of giving us more clarity,” he said of Friday’s job report, “it has all the characteristics of a perfect Rorschach test. You see what you want to see.”
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