WASHINGTON, July 2 (UPI) -- Not as many jobs were created in the United States during the month of June as economists had expected, which could prove to be a political blow for the Bush administration as the White House gears up for the November elections.
Earlier Friday, the Labor Department reported that only 112,000 jobs were created last month, less than half of the Wall Street expectation of 250,000. Moreover, the Labor Department revised its figures for April and May down to 324,000 and 235,000, respectively, from 346,000 and 248,000. Granted, the unemployment rate remained steady at 5.6 percent, and President Bush has overseen the creation of 1.5 million new jobs as paying positions were created for 10 consecutive months. Nevertheless, the fact that 11,000 manufacturing jobs were lost in June after four straight months of gains might prove particularly troublesome for Bush.
The Washington-based Economic Policy Institute argued the 5.6 percent unemployment rate is "as high as in November 2001, when the recovery began. Moreover, underemployment, such as involuntary part-time work and discouraged workers, is more prevalent."
Yet by and large, economists are taking the latest data in stride, pointing out that there is less fear now of the economy overheating in the near future. The Federal Reserve had raised interest rates for the first time in four years earlier this week in an effort to keep the economy from expanding too quickly. The Fed raised the key federal funds target rate from 1 percent, its lowest level since 1958, to 1.25 percent on Wednesday.
As such, some economist speculate that the Fed may have acted too soon, while other argue that the central bank is unlikely to raise rates any further for the next few months. Others, however, point out that data for one month alone cannot be used to determine a trend in which to set monetary policy.
"We really should not read too much into these numbers, at least not yet," said Joel Naroff, chief economist at Naroff Economic Advisors. "In previous job recoveries, there would be a month here and there that disappointed. We need to see whether this is a trend or a one-time event." But Naroff warned that "the downward revisions to both April and May's totals is a cautionary signal. That usually doesn't happen when job growth is accelerating. The details of the June payroll report provide some reason to suspect the gains will improve going forward. Manufacturing employment declined, but every other report pointed to a rise," he added.
Certainly, financial markets are taking the latest data in stride, as the Dow Jones industrial average is down only 33.26 points to 10,300.90, while the Nasdaq is down 11.03 points at 2,004.53.
Meanwhile, the U.S. Chamber of Commerce pointed out that the slower pace of job creation could keep the economy from growing much too quickly and thereby force the Fed to raise interest rates still further.
"The modest nature of the report ... should ease some of the fears about whether the economy is in danger of overheating and creating rapidly rising inflation," said the chamber's chief economist, Martin Regalia, as he pointed that it was "not unusual or alarming for an economy to take a breather after three months of robust expansion."
As for the administration, its senior officials focused on the positive facts.
"Job growth through the first half of this year averaged more than 200,000 a month. These are jobs in good industries, and there can be no doubt that the president's well-timed tax relief spurred this growth," said Treasury Secretary John Snow. "We have fought our way out of recession and are now seeing positive news on many fronts. Consumer confidence is strong, home sales are at record highs, and economic growth over the past three quarters is the strongest it's been in 20 years," Snow added.
Still, others pointed out that the labor market is still far from robust.
"If unemployment were at 2000 levels, 2.4 million more Americans would have jobs. If labor force participation levels were at 2000 levels too, more than 4.7 million additional Americans would have jobs," argued Peter Morici, an economics professors at the University of Maryland.
