Job market still remains weak

By SHIHOKO GOTO, UPI Senior Business Correspondent  |  March 5, 2004 at 12:58 PM
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WASHINGTON, March 5 (UPI) -- The Labor Department reported early Friday that the unemployment rate in February remained unchanged at 5.6 percent, but the number of non-farm payrolls reached only 21,000, considerably lower than most analysts' expectations. And that is worrying to many people both inside and outside the government.

"Employment levels in most of the major industries were little changed over the month," the Labor Department said, noting that construction jobs fell by 24,000 in February, while job losses in the manufacturing sector have averaged 16,000 a month since August.

"This ain't no lean, mean job machine, that's for sure," said Joel Naroff, chief economist at Naroff Economic Advisors. "The February payroll report was awful, to say the least. Not only were a meager 21,000 new jobs created, but the previous two months gains were revised downward. And if you take out the government, there were no jobs added in the private sector.

"Over the past three months, a grand total of 126,000 new positions were created. That would be weak for one month. For three, well it is," Naroff added

Indeed, the civilian labor force decreased by 392,000 to 146.5 million compared to the previous month, and the labor force participation rate fell to 65.9 percent from 66.1 percent, suggesting that more potential workers have stopped trying to look for jobs.

The administration, however, endeavored to put a brave face on the latest data.

"The unemployment rate of 5.6 percent continues to be below the averages of the 1970s, 1980s and 1990s," noted Labor Secretary Elaine Chao in a statement following the release of the latest figures.

At the same time, Chao acknowledged the importance of job creation, particularly in an election year.

"As the president has said many times, we're not going to rest until every American who wants a job can find one. Congress needs to pass the president's new Jobs for the 21st Century initiative, in order to train and retrain workers for good-paying jobs in high-growth fields where workers are needed most," she stated.

Certainly, the economy and the job market in particular will be one of the key issues for many voters in the November elections. The Bush administration has emphasized that the worst appears to be over for the employment situation, and that the economy has been on a steady recovery track due to tax cuts and easy monetary policy.

Democratic contender John Kerry, on the other hand, has pledged to roll back the tax cuts for high-income earners and put an emphasis on forging incentives to build up the manufacturing sector in particular.

"Today's jobs numbers show how far we are from any of the president's promises being kept. The fact is that every new job created this month was for government employees. There were zero private sector jobs created -- no manufacturing jobs," said Kerry shortly after the release of the data.

"At this rate, we won't dig ourselves out of the jobs hole George Bush has gotten us into for almost a decade. But we can't wait that long," Kerry added.

But regardless of what the Republicans or the Democrats might propose to improve the job situation in the United States, most economists agree that the Federal Reserve is unlikely to raise interest rates for a while, in light of the latest employment data.

The Fed has kept the key federal funds target rate at 1.00 percent, its lowest level in over four decades, in an effort to keep afloat the still-fragile U.S. economy.

Low interest rates have benefited both individuals and businesses alike, as it has allowed for historically low mortgage rates and lending rates for investors. As the economy appeared to have been gaining steam by the latter half of last year, speculation that the Fed would hike interest rates to prevent the economy from overheating and stem inflationary pressure had risen.

Such concerns, however, seem to have abated with the latest jobs numbers.

"In spite of what looks to be a strong economy, there are few jobs being created. That is a concern not only to the president, but to the Fed as well," Naroff said. "The benefits from debt refinancings and tax cuts will wane as we move through the year and the economy needs to start generating income the old fashioned way: People need to earn it.

"The recovery can only be sustained long-term through job creation. That is not happening and the FOMC will remain quite patient as a consequence. Unless something changes quickly, the chances the Fed will raise rates this year looks to be small and falling," he said.

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