Jobs Report for January Disappoints
U.S. employers added a net 146,000 workers in January, the government said Friday, a tepid showing that underwhelmed economists and reinforced concerns about the slow pace of job creation.
Still, the uptick was large enough for President Bush to avoid becoming the first president since the Great Depression to see a net decline in jobs during a term in office.
The nation’s unemployment rate fell in January to 5.2% from 5.4% in December, the Labor Department said. The January rate was the lowest in more than three years. But this was due to 200,000 people opting out of the labor force, perhaps because they were putting their job search on hold, economists said.
In another negative sign, the Bureau of Labor Statistics trimmed its previous estimates for hiring in the fall quarter by about 10%, or 59,000 jobs.
But the bureau also revised upward its total for the March 2003-to-March 2004 period as part of its annual benchmarking. As expected, this added 203,000 more jobs to that period.
Economists had been expecting about 190,000 net new jobs in January. The modest actual job gain triggered a decline in bond market yields Friday, while stocks rallied as investors figured that it would reduce the need for the Federal Reserve to become more aggressive in hiking interest rates.
Ian Shepherdson of High Frequency Economics, a consulting firm, blamed the gap between expectations and reality on the surge in energy prices.
“With oil prices well off their peaks, leading indicators of labor demand are beginning to pick up,” he said. “I expect much better payroll numbers by the second quarter, maybe sooner.”
Others were less optimistic.
“Every month, the employment number comes in below expectations,” said economist Jared Bernstein of the liberal Economic Policy Institute. “I hope I’m wrong, but it appears lackluster job growth is embedded in the recovery.”
Criticism of sluggish job growth was one of the Democrats’ more potent campaign weapons last year against Bush.
The historical record will show that payroll employment increased by 119,000 from January 2001 to January 2005. That’s growth of less than 0.1% for a workforce of 133 million.
What’s unresolved is whether this rise represents a modest achievement or a major failure.
Bush partisans contend that the 2001 recession began almost as soon as he took office, putting the economy in a deep hole. Payrolls fell by 1.9 million in 2001, 563,000 in 2002 and 61,000 in 2003.
In his State of the Union address this week, Bush focused on the more recent past, noting that “in the last year alone, the United States has added 2.3 million new jobs.”
Although the number is a dramatic turnaround from previous years, the president once promised that his tax cuts would do much more.
For example, the White House Council of Economic Advisors forecast two years ago that speeding up the tax cuts would raise nonfarm employment by this point to 137 million. The tax cuts were sped up, but employment is 4 million short of the promised level.
“A huge portion of these tax cuts went to billionaires. That does little to generate demand or drive the economy forward,” said Scott Lilly, a senior fellow at the Center for American Progress, a liberal think tank.
If the country hasn’t actually lost jobs under Bush the way his presidential opponent, Sen. John F. Kerry (D-Mass.), and others predicted, Lilly said the record was still the worst since the Great Depression. Before the current administration, the worst job growth since the Depression occurred in the second Eisenhower administration, when employment grew by 1.6%.
More than three years after the end of the last recession, the economy is proving perplexing if not confounding. The gross domestic product is growing strongly. Until the most recent quarter, so was productivity. Corporate profits are surging. But though companies are using their cash hoards to buy other companies or their own stock or invest in labor-saving technology, many are reluctant to hire.
Some conservative economists contend that there has been much more employment growth under Bush than he’s being given credit for. To make this claim, they reject the payroll numbers that come from corporations in favor of the regular surveys of workers themselves.
By that standard, 2.4 million more Americans are employed now than when Bush was first sworn in.
This number more closely reflects the economy, said economist Tim Kane at the conservative Heritage Foundation. “Otherwise, you’d have to say this is a horrible economy, and that’s just not the case.”
