December Job Growth Far Below Forecasts

Times Staff Writer

The U.S. economy managed to add only 1,000 nonfarm jobs in December as employers relied on productivity gains, rather than hiring, to meet increased demand, the Labor Department said Friday.

The unemployment rate did dip two-tenths of a point to a 14-month low of 5.7%, but that was because more than 300,000 people dropped out of the labor force -- a sign not of economic strength but of an exodus of discouraged job seekers.

Most analysts had forecast that employers boosted payrolls by 150,000 last month. After Friday’s news, major stock benchmarks fell and the dollar sank against the euro. The Dow Jones industrial average tumbled 133.55, or 1.3%, to close at 10,458.89, its biggest single-day percentage drop since October.

The anemic employment report also set off chatter on the presidential campaign trail, with Democrats ridiculing Bush administration policies and Republicans generally seeking to change the subject.


The president, meeting with a group of small-business women, pointed to the decline in the unemployment rate, recent productivity gains and increases in factory orders as evidence that “the economy is getting better.”

Typical of the Democratic response was presidential challenger Howard Dean’s: “Under Bill Clinton, nearly 1,000 jobs were created every three hours for eight years. Under George Bush, it took the entire month of December.”

Some of December’s poor showing may be a fluke -- the product of a change in Americans’ holiday buying habits that has not yet been captured by government measuring methods. But even economic optimists said the latest employment numbers were bad news.

“No question, the December employment report was a disappointment,” said Bank of America Corp. chief economist Mickey D. Levy.

It was a disappointment as well for Don Williams, an accountant and financial reporting specialist for Transamerica Corp. in Los Angeles for almost 30 years before being laid off in April 2002.

Williams, 53, said he hadn’t found full-time work since then, despite sending out more than 500 resumes. He and his wife, a part-time recreation director for the Long Beach Unified School District, have lost their house and health insurance.

“I don’t understand it,” he said. “You do all the right things you were told to do -- work hard, get an education -- and I can’t even get a callback.”

The most immediate effect of the new numbers may be in Washington, where the administration and the Republican-controlled Congress will be under increased pressure to revive a federal jobless benefits program they let lapse last month.


Until it began shutting down last month, the federal program added 13 weeks of benefits to the 26 weeks available in the traditional state-federal benefits system. Activists said renewal of the program is particularly important because 1 in 5 unemployed workers has now been without a job for more than six months. That comes to about 1.7 million of the nation’s 8.4 million jobless.

“This is the first time in 50 years that long-term joblessness has been above the 20% mark without workers being offered any federal jobless benefits,” said Maurice Emsellem, policy director of the National Employment Law Project Inc. in Oakland.

Not only did the Labor Department say the economy produced almost no new jobs in December, it also trimmed its earlier estimates of job growth for October and November by 51,000. And it said the nation’s manufacturing sector, which many had hoped would add jobs for the first time in nearly 3 1/2 years, extended its losing streak last month by shedding an additional 26,000 workers.

Some analysts worry that unless American employers begin adding jobs in substantially greater numbers than they have in recent months, the economic recovery, which is thought to have started two years ago and has picked up steam since September, could sputter out.


But the new employment report suggests another -- and in some ways a more unsettling -- possibility: that the recovery will proceed apace with consumption, investment and corporate profits all expanding, but without additional jobs, leaving those unlucky enough to be jobless stranded.

With the release of the December figures, employment data for all of 2003 show that U.S. payrolls declined by 331,000 last year after falling 1.5 million the year before. The last time payrolls fell two years in a row was in 1944-45.

Even seemingly encouraging numbers in the December report appeared suspect because of the shrinkage of the labor force. For example, the Labor Department reported a decline in the unemployment rates for whites, African Americans and Latinos. But except in the case of Latinos, the entire decline can be explained by a labor force exodus, a sign that those who lost jobs have become so discouraged they have given up looking for work.

The unemployment rate for whites fell from 5.2% to 5%, while the rate for African Americans slipped from 10.4% to 10.3%. The Latino rate fell from 7.4% to 6.6%.


Retail employment fell by 38,000 during the month, according to the Labor Department, an unexpected development that analysts regarded as a statistical quirk because of seasonal adjustments in the data.

In recent years, consumers have tended to buy less before Christmas and more afterward. Retailers have reacted by hiring fewer people for the holiday rush, but holding on to those they did hire. However, Washington has not altered the way it seasonally adjusts the employment numbers to smooth out month-to-month ripples.

The loss in the retail sector was offset by gains in the professional- and business-services industry, which added 45,000 workers, 30,000 of them temporary positions. The construction industry added 14,000.