Job Growth Slows Down in November
The nation’s hiring engine sputtered again in November, as the Labor Department reported Friday that the economy added an unimpressive 112,000 net jobs during the month.
That was much less than the 200,000 jump economists were expecting, and only about two-thirds of what is needed each month just to keep up with population growth.
The unemployment rate fell to 5.4%, from 5.5% the previous month.
“Just when I thought it was safe to say the job market had finally firmed up, we discovered once again we were wrong,” said economist Joel Naroff of Naroff Economic Advisors. “There’s a new psychology in the corporate sector. If they need to hire 10 people, they try to get by with five.”
Employment growth has seesawed all year, with brief periods of strength followed by extended episodes of weakness. November’s numbers looked particularly poor in contrast to October’s total, an impressive 303,000 even after being revised downward Friday.
October’s numbers were probably inflated by temporary jobs stemming from cleaning up Florida after four successive hurricanes, economists said.
It’s not surprising that business executives are cautious. Consumer confidence is down and interest rates are moving up, both of which could foreshadow a drop in household spending.
“Employers sense the economy will slow in the first several months of 2005 and thus see no reason to rush out and add to their payroll, especially now that analysts are projecting slimmer corporate profit growth next year,” said Bernard Baumohl of Economic Outlook Group.
The Bush administration put a positive spin on the report. The jobs numbers are “a confirmation that the American economy is on a steady growth path,” Treasury Secretary John W. Snow said. The economy has created more than 2 million net jobs this year, averaging nearly 200,000 a month, he said.
Others drew a more pessimistic picture.
The liberal Economic Policy Institute noted that in July 2003 the administration called its tax cut a “Jobs and Growth Plan.” The White House’s Council of Economic Advisors estimated then that 5.5 million jobs would be created by the end of 2004.
With one month to go, the institute said, the forecast is 3 million jobs short.
“Any time there’s been a month of good job growth, people think it’s going to settle down into consistently good job growth,” said Lawrence Mishel, president of the institute. “That hasn’t happened. It’s very uncertain that it will.”
If job creation has been underwhelming, wages have lately turned that way too. Average weekly wages fell $1.25 in November to $533.47. Over the last year, wages rose more slowly than inflation.
That might be a reason why the number of people holding down two jobs increased by 346,000 in the last year, to 7.6 million. Multiple jobholders are now 5.4% of the labor force.
November’s job growth was held down by the elimination of 16,200 retailing positions. That restraint by merchants now looks smart in light of disappointing holiday sales. Manufacturers, whose four-year-old slump seemed to have ended in the spring, tightened their belts again, cutting another 5,000 jobs.
One bright spot was the lodging industry, up 18,000. However, the Labor Department said about half of that growth was because of the return of striking workers. Other strong categories included hospitals, up 8,000; nursing and residential care facilities, up 7,000; and physicians’ offices, up 6,000.
Sluggish job reports imply a weakening economy. But the consensus viewpoint is still that the Federal Reserve will raise its benchmark short-term interest rate another quarter point, to 2.25%, at its next meeting Dec. 14.
Despite even softer payroll numbers in the summer, “the Fed kept tightening,” said Ian Shepherdson, chief U.S. economist for High Frequency Economics, in a report to clients. Another increase in February, he added, was “still more likely than not.”
Wells Fargo Bank’s chief economist, Sung Won Sohn, didn’t believe the weak employment report boded trouble for the economy.
“It is too early to be pessimistic,” Sohn said, pointing out that “uncertainties have diminished in recent months. We have gone through the Olympics and the national election without terrorism, the price of oil is trending down.... Business spending on equipment, software, inventories, etc., has been rising.”
On Wall Street, the bad news about employment was offset by a continued fall in oil prices and a bullish revenue outlook from chip giant Intel Corp. Oil prices dropped below $43 for the first time in more than two months.
The Dow Jones industrial average rose 7.09 points, or 0.07%, to 10,592.21.
Bond yields, however, tumbled, reflecting views of a slower economy.
