U.S. Job Total Falls a Rare 2nd Year in Row
Capping the first back-to-back years of job losses in five decades, U.S. employment fell by 101,000 in December as struggling retailers and manufacturers slashed payrolls and kept the economy stagnating.
The Labor Department’s report Friday surprised economists. They had been expecting an uptick in hiring last month. Instead, the gloomy December figures, coupled with a sharply revised decline of 88,000 nonfarm jobs the previous month, heightened concerns about the durability of a recovery without meaningful employment growth.
The jobless rate last month remained at 6% -- an eight-year high.
“I’m still optimistic that this year will be better than the last, but it’s certainly starting out with no positive momentum, which is not a good feeling,” said Bill Cheney, chief economist for John Hancock Financial Services in Boston.
The Bush administration saw a silver political lining in Friday’s jobs report. White House spokesman Ari Fleischer told reporters that December’s bleak employment numbers were “another reason why Democrats and Republicans need to join together” to swiftly pass President Bush’s $674-billion economic stimulus plan.
Bush has said his proposal, which includes income tax cuts and the elimination of taxes on stock dividends, would help create 2.1 million jobs over three years. But leading Democrats have criticized the plan, calling it a giveaway for the wealthy.
Analysts said the labor report may indeed help Bush push through some version of his proposal -- a view apparently shared by Wall Street, which initially reacted negatively to the job numbers Friday but by the end of trading lifted the Dow Jones industrial average 8.71 points to close at 8,784.89.
Friday’s report “strengthens the case for new growth stimulus and makes it more likely that it will happen quickly,” said Jim Glassman, senior U.S. economist for J.P. Morgan Chase & Co.
For some months, analysts have been concerned about a prolonged “jobless recovery.” They said the latest employment statistics bode ill for consumer confidence and increase the possibility that Americans will curtail their spending, which would make it harder for the economy to pull out of its slump.
Since January 2001, the economy has lost 1.6 million net jobs, the majority in the high-tech and manufacturing sectors.
December’s employment decline was attributed to weak holiday hiring and employers’ reluctance to add to their payrolls amid sluggish consumer and business spending and uncertainties about the effect of tensions with Iraq and North Korea.
U.S. retailers, which typi- cally boost hiring at year-end, slashed 104,000 jobs last month. Cutbacks are expected to continue after that sector reported its worst holiday buying season in more than three decades.
“In the last two months of the year, we all of a sudden took a tailspin,” said John Challenger, chief executive of Challenger, Gray & Christmas, an outplacement firm based in Chicago.
The only bright spot in the year-end jobs picture was the services sector, which added 73,000 net jobs. That included 10,000 in health-care services, 28,000 in amusement and recreation services, and 16,000 in the hotel industry.
But the long decline by U.S. manufacturers, which have shed 2.4 million jobs since April 1998, apparently has not hit bottom. Faced with continued weakness in Europe and Japan, and fierce competition from low-cost producers in China and elsewhere, U.S. factories cut 65,000 jobs in December -- the 29th straight monthly drop and the largest in 10 months.
The continuing layoffs in manufacturing are a “clear indication that there isn’t much strength in capital spending,” said Steven Cochrane, senior economist at Economy.com, an economic research firm in West Chester, Pa.
“That’s the worst part of this report,” he said. “That’s what we need to get this economy back on its feet again.”
Many jobless people also want to get back on their feet, but they are waiting longer to rejoin the workforce. The portion of the unemployed who have been jobless for at least six months has increased to 21.8%, the highest level since October 1992, said Jared Bernstein, an employment specialist at the Economic Policy Institute in Washington.
Dan Meckstroth, chief economist for the Manufacturers Alliance, a trade group in Arlington, Va., said that because of the tough economic conditions, companies remain focused on increasing productivity without adding jobs.
“By late 2003 and 2004,” he said, “we hope you’ll start to see some small increases in manufacturing jobs.”
