Granted, the unemployment rate fell to its lowest level in 14 months with 8.4 million people being jobless. At first blush, the decline could be seen as a boost for the Bush administration, was nonetheless overshadowed by the fact that total non-farm payroll employment only increased by 1,000, having soared by 43,000 the previous month. The Labor Department thus described the latest result as effectively "unchanged" from the previous month.
Even senior administration officials acknowledged the need for creating more jobs quickly.
"Today's report on December job growth demonstrates that while the fundamentals are in place, we must continue our efforts to strengthen the environment for job creation," stated Treasury Secretary John Snow.
But Snow also pointed out that the jobless rate was lower, and a number of other key indicators including housing starts, remained strong.
"We are on the right path to a strong recovery, and we must stay on the path," he added.
His bullish comments were echoed by Labor Secretary Elaine Chao.
"The economy has created jobs in each of the last five months, though last month's job growth was less robust than forecasters projected. The president's economic policies are working," Chao stated.
But as the nation braces for a presidential election in November, the economy and the job market in particular will be a key issue for all candidates, and could make or break the Bush re-election campaign. To be sure, the U.S. economy saw robust growth in the latter half of 2003, with GDP reaching 8.2 percent in the third quarter. Yet many voters are concerned that so far, economic recovery has brought little in terms of improving the daily lives of average workers, especially as the labor market continues to be tight.
The latest data from the Labor Department will likely only reinforce such concerns. The agency reported that the retail and manufacturing sectors in particular were hard hit in December, with jobs in retail trade falling by 38,000.
"Weak hiring for the holiday shopping period resulted in seasonally adjusted job losses in general merchandise stores," the department stated. Moreover, jobs in the manufacturing sector fell by 26,000.
Analysts were largely deeply disappointed with the latest report.
"Instead of the expected great job report, we discovered that firms were back in turtle mode. There was absolutely no hiring in December and the previous increases are now smaller than had been reported," said Joel Naroff of Naroff Economic Advisors.
"The markets were all dressed up and ready to party. All that was needed was the hoped for 150,000 plus job increase. Instead, the band stopped playing and people are now wandering around aimlessly," Naroff added.
So too were labor union leaders.
"It's time for the Washington elite to take off the rose-colored glasses when it comes to the economy and take a long hard look at what's really happening to working men and women. Although corporate profits have increased steadily, even during the recession, and worker productivity is at record highs, workers and their families continue to suffer," stated AFL-CIO President John Sweeney.
Given the continued weakness in the job market, most analysts expect Federal Reserve policymakers to keep interest rates unchanged at their current lows when they next meet at the end of this month. There have been concerns that the economy could overheat and inflationary pressure was bubbling up as a result, which would require monetary tightening.
The uncertainties in the labor market "will reinforce the (Federal Open Market Committee) members who have been arguing that rates can be kept low for an 'extended period'. That should help the fixed income markets," Naroff said.
In trading Friday, investors sold off shares on the disappointing news, as the Dow Jones plunged 133.55 points to close at 10,458.89, while Nasdaq lost 13.33 points to 2,086.92.
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