NEW ECONOMIC FEARS RAISED
Jobless rate drops; new growth flat
Published: Saturday, January 10, 2004 at 6:01 a.m.
Last Modified: Friday, January 9, 2004 at 11:55 p.m.
The nation's unemployment rate dropped sharply to a 14-month low in December, but underlying that positive number was some grim economic news -- only a handful of new jobs were created and hundreds of thousands of discouraged people dropped out of the work force.
"It's frustrating to say the least," said William Holland, a 50-year-old, laid-off steelworker in Baltimore who has been unemployed for nearly three years. "I don't give up. I am sending out resumes, I am on the Internet, I am trying every avenue."
Holland shares his frustration with 8.4 million others who are looking for work. The search hasn't been easy because companies are barely hiring.
Although unemployment fell to 5.7 percent in December, down from 5.9 percent in the prior month, only 1,000 new jobs were created, a shockingly low number in a recovery, according to the government's Bureau of Labor Statistics.
What's more, the work force, which typically grows when the economy advances, shrank as 309,000 people stopped looking for work.
The withdrawal of these "discouraged workers" from the job market pushed the unemployment rate down, despite the economy's failure to generate a significant number of new jobs.
"Ultimately, the real issue is job creation," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa. "That is where you get income, that is where you get demand. The report was a shocker to say the least."
Naroff expected 100,000 jobs to be created or at the very least 75,000.
"It is almost impossible to understand what is truly going on," he said.
He wasn't the only expert baffled by the gloomy jobs number. John E. Silvia, chief economist at Wachovia Corp., a Charlotte, N.C.-based banking company, expected 150,000 jobs to be created in December.
"I was clearly disappointed with this report," Silvia said. "This has to be a concern. It may be a one-month fluke, but I have to treat it as a concern."
The December numbers are a continuation of a long period of inadequate job creation.
The economy has lost more than 2 million jobs since employment peaked in February 2001, and gains in recent months have been minuscule.
The stock market reacted poorly to the news. The Dow Jones industrial average lost 133.55 points, or 1.26 percent, to close at 10,458.89.
The Standard & Poor's 500 stock index fell 10.06, or 0.89 percent, to 1,121.86, and the NASDAQ composite index, which is dominated by large technology companies, lost 13.33 points, or 0.63 percent, to 2,086.92.
Despite all that, President Bush lauded the economy in a Washington, D.C., speech before women small business owners and said he is optimistic about its prospects.
"This economy is strong and it is getting stronger," Bush said.
He noted that unemployment dropped, but he said the decline wasn't good enough.
"We want more people still working. But nevertheless, it is a positive sign that the economy is getting better," he said.
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Treasury Secretary John W. Snow underscored Bush's remarks, saying the administration "must continue our efforts to strengthen the environment for job creation."
"The fact is that while an index of manufacturing orders is at a 50-year high, construction spending is up, housing starts are at a 20-year high, retail sales are solid, and GDP (gross domestic product) growth is strong, the administration will not be satisfied until every American who wants a job can get one," Snow said in a news release.
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Creating more jobs is seen by experts as key for Bush's re-election effort.
"Politically, it (job creation) is obviously critical," Silvia said. The administration "can't rely on just tax cuts alone" to win voters' support.
Bush's goal of providing a job for everyone who wants one won't be easy to meet, especially because companies have been reluctant to hire. It still takes 19.6 weeks for the average unemployed person to find a job, and 22.3 percent of unemployed workers have been looking for 27 weeks or longer.
The lackluster job market isn't confined to one or two segments of the economy, according to the Bureau of Labor Statistics report.
Retailers, including sporting goods, music and book stores as well as gas stations, trimmed 38,000 jobs in December, surprising experts because companies typically add workers during the holiday season. Leisure and hospitality industries cut 4,000 jobs, and government trimmed workers, too. Manufacturers, which have lost 2.8 million jobs since July 2000, lost an additional 26,000 jobs.
Many economists expect hiring to pick up in the coming months.
Ken Goldstein, at the Conference Board, a New York-based research group that tracks consumer confidence, predicted that by springtime 100,000 new jobs a month will be "normal."
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