Weak Growth in U.S. Jobs Stirs Concerns
The nation’s unemployment rate delivered a likely last hurrah in December for the current good times, holding steady at a near three-decade low of 4%.
Economists found little comfort in the Labor Department’s latest assessment of the country’s employment situation issued Friday. The private sector created a mere 49,000 jobs in December, less than half the number of the previous month. There were hints of wage inflation. Factory employment tumbled for the fifth straight month, and retailers hired only one holiday worker for every five brought on during the 1999 Christmas shopping season.
As if that weren’t enough, the average workweek for production and nonsupervisory workers, who make up 85% of the U.S. work force, slipped last month from 34.3 to 34.1 hours. Except for January 1996, when a blizzard paralyzed the Northeast, that was the shortest workweek since the recession of the early 1990s.
“There’s no solace in these numbers,” lamented Allen Sinai, chief global economist for Decision Economics Inc. in New York. “The economy has peaked and is headed down. The unemployment rate has nowhere to go but up.”
Financial markets certainly took no solace. Worried by the sagging job picture, more disappointing corporate profit projections and an outflow of mutual fund money, investors battered stock indexes.
The technology-laden Nasdaq Composite Index dropped 159.14 points, or 6.2%, to close at 2,407.65. The Dow Jones industrial average fell 250.4 points, or 2.3%, to 10,662.01. The Standard & Poor’s 500 Index fell 35 points, or 2.6%, to 1,298.34.
By day’s end, all three indexes had more than given up the gains they posted in the wake of the Federal Reserve’s surprise decision Wednesday to slash interest rates in hopes of reviving growth.
Growth Projections Cut for 2 Quarters
After climbing for almost 10 years--the last five of them at a ferocious pace--the economy has turned down with a speed that has alarmed economists, policymakers and many ordinary citizens.
Forecasters have been scrambling to reduce their projections of economic growth for the yet-to-be-tallied October-through-December quarter and the just-started January-through-March quarter from more than 3% to 2% or lower.
Some say the economy is already shrinking. “We’re in a recession right now,” said Kathleen Camilli, chief economist for Boston-based Tucker Anthony Inc.
By comparison with the drumbeat of bad economic news, the latest employment report at first seemed almost sunny. Despite the weak job growth, December’s 4% jobless rate was better than analysts had expected and ensured that the jobless rate for the year as a whole came in at an identical 4%, the best the economy has posted since 1969.
Unemployment among Latinos and blacks, who are often hit earliest and hardest by downturns, remained essentially unchanged during the month. The Latino rate fell from 6% in November to 5.7% last month. The rate for blacks increased by what department officials said was a statistically insignificant one-tenth of a percentage point to 7.6%.
Friday’s report contained another bit of good news for working people. Average hourly earnings jumped 5 cents during the month to $14.01. Over the course of the year, hourly earnings have risen 4.2%, a pickup from the comparatively slow pace of wage growth in recent years.
But some economists warned that the pickup could pose a problem for the Fed, which has begun cutting interest rates on the assumption that its actions will not cause wages and prices to begin spiraling.
“The Fed is saying inflation is contained, but that may not be true,” said Paul L. Kasriel, economic research director for Northern Trust Corp. in Chicago. “We could be looking at higher inflation, and that would constrain what they can do for the economy.”
Even those who are being granted higher wages may not be enjoying it all that much; the Labor Department said the increase in hourly earnings last month was accompanied by declines in the workweek and overtime pay. The declines were steepest in the battered manufacturing sector, where the average employee lost 48 minutes of work--and pay--a week.
Manufacturing also was where the job losses were greatest during the month. Goods-making firms shed 62,000 workers in December, bringing their job losses for the year to 180,000. The National Assn. of Purchasing Management reported earlier this week that manufacturing orders and production slumped last month to their lowest levels since the 1990-91 recession.
The manufacturing job losses were compounded by cutbacks in construction, where cold weather and a slowdown in building shaved payrolls by 13,000 jobs.
Experts See Better Climate for Home Sales
Analysts said there is little chance for an immediate rebound in construction. A separate government report Friday said that U.S. sales of new single-family houses dropped 2.2% in November after a 1.1% decline in October. But they said that the Fed’s interest rate reductions should eventually improve home sales by driving down mortgage rates.
Retailers added only 8,000 workers in December, making it the worst holiday shopping month for jobs in five years. That was less than one-fifth of the 43,000 retail jobs added in December 1999.
The economic sector where the hiring was heaviest last month was government. State and local governments added 56,000 workers, helping to push overall job growth, both public and private, to 105,000. But that was still far below the 200,000-plus monthly additions that the economy was posting earlier this year.
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U.S. Unemployment
Percentage of U.S. work force not employed, seasonally adjusted:
December: 4.0%
Source: Labor Department
