U.S. employers added a net 144,000 jobs to their payrolls in August and the nation’s unemployment rate dropped a notch to 5.4%, the government said Friday in a report fraught with political and economic implications.
The pace of nonfarm hiring was double the previous month’s and in line with economists’ expectations, but not nearly fast enough to erase President Bush’s remaining job deficit by year’s end. Unless employment growth averages 228,250 a month from September through December, Bush will be the first post-Depression president to finish his term with fewer jobs than when he started.
“At the rate that this administration is creating jobs, you’re not going to have a net plus-one job in the state of Ohio until the year 2011,” Democratic nominee Sen. John F. Kerry told supporters during a stop in one of the nation’s hardest-hit swing states. “I don’t think this is something to celebrate. I think it’s something to get to work on. I think it’s something to change.”
Bush, on the campaign trail after the Republican National Convention, hailed Friday’s figures as proof “our economy is strong and getting stronger.”
“We’ve added about 1.7 million new jobs since August of ’03,” Bush told supporters in Moosic, Pa. He said the 5.4% unemployment rate, the lowest since October 2001, was “below the average of the 1970s, 1980s and 1990s.... Our growing economy is spreading prosperity and opportunity, and nothing will hold us back.”
In economic terms, the picture was mixed. The unemployment rate fell a tenth of a percentage point, from 5.5% in July. But the decline was caused in part by a 152,000-person net reduction in the labor force, partly reflecting some job hunters’ giving up their searches.
The new figures show the recovery proceeding at a slower pace than during the spring, when job growth averaged 295,000 a month from March through May. But the pace is picking up. August’s gain followed a July net increase of 73,000, which was revised up from last month’s initial estimate of 32,000.
Employers need to add 125,000 to 150,000 net new jobs every month just to keep up with population growth, economists estimate. It would take even more growth to substantially reduce the unemployment rate, which climbed from 3.8% in April 2000 to a post-recession peak of 6.3% in June 2003.
“It looks like things have picked up, but we’re certainly not out of the woods yet as far as this soft patch is concerned,” said Nigel Gault, economist at consulting firm Global Insight.
Analysts had expected 150,000 net new jobs in August. Financial market reaction was muted. Stock prices declined, weighed down by negative technology-industry news. Bond prices fell and yields rose because traders viewed the job growth as strong enough to reinforce expectations that the Federal Reserve would boost short-term interest rates again this month.
“There was a lot of anxiety around midsummer that the economy was weakening dramatically,” said Greg Valliere, chief strategist at Schwab Washington Research Group. “This number gave some assurances to the markets that the economy is in decent shape. It put to rest the anxiety in the markets.”
In political terms, the report offered rhetorical ammunition to both sides. The sluggish pace of job growth has been perhaps the biggest blemish on the economic record of the president, who came into office just as the 2001 recession was about to unfold. But the outlook has brightened considerably over the last year.
From January 2001 through August 2003, U.S. employers shed 2.6 million jobs. About two-thirds of those positions have been recovered in the last 12 months, but the job count remains 913,000 below where it was when Bush took office.
Still, analysts said, the current job count -- and even the unavoidable comparisons to Herbert Hoover, the last president to have a net job loss during his term -- might be less important to voters than their perceptions of which way the economy is going.
Because the latest numbers signal that job growth is accelerating again, that could work to Bush’s advantage, they said.
“I don’t think it’s in either candidate’s corner,” Goldman Sachs economist Andrew Tilton said. “It’s a better report than we’ve seen over the last couple of months, but we had stronger growth back in the spring.”
Administration critics tried their best to make it an issue. They noted that the rate of job growth over the last year was worse than during any 12-month period in Bill Clinton’s tenure.
“Yeah, we’re still turning the corner, but this is the widest corner I’ve ever seen,” said Larry Mishel, president of the liberal Economic Policy Institute. “We’re far from the robust job growth we need for a healthy, sustained recovery.”
The administration’s allies said it wasn’t fair to blame Bush for job losses caused by recessionary forces beyond his control and that the downturn would have been worse if not for the president’s tax cuts and economic growth policies.
Last month’s job growth was concentrated in the services sector, which added 108,000 payroll positions, the Labor Department reported. Education and health services increased by 45,000, professional and business services by 32,000, government by 24,000 and financial services by 18,000. Retail employment dropped 11,300, and information services lost 10,000.
Construction firms added 15,000 jobs in August. The nation’s manufacturing sector added 22,000 jobs, boosting its gains to 107,000 since January. During the first three years of Bush’s presidency, U.S. factory employment fell by 2.8 million.
About 8 million Americans were counted as unemployed last month, down from 8.2 million in July. The average duration of unemployment rose to 19 weeks from 18.6 weeks in July.
On the bright side, average hourly earnings increased 0.3%, somewhat more than expected, after a 0.4% gain in July.
Times staff writers Peter Wallsten in Moosic, Pa., and Matea Gold in Newark, Ohio, contributed to this report.
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Net gain or loss of nonfarm payroll jobs (in thousands)
Aug 2003: -25 March 2004: +353 Aug 2004: +144
Source: Labor Department