More jobs to be had, but still not enough

By SHIHOKO GOTO, UPI Senior Business Correspondent  |  Sept. 3, 2004 at 11:54 AM
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WASHINGTON, Sept. 3 (UPI) -- The Bush administration should be delighted that the job market picked up in August, as voters continue to fret about jobs ahead of the Nov. 2 presidential elections. But while President Bush will likely emphasize the latest improvement in the jobs data, the Democrats will be pointing out that there has been a net loss in jobs since January 2001.

While there may be different ways to interpret the numbers, one thing is clear: jobs and job data will remain a politically sensitive issue, and only one more monthly report will be released by the government before voters go to the polls.

The U.S. Department of Labor reported early Friday that 144,000 jobs were created in August, a considerable increase from the 73,000 jobs made in July. Meanwhile, the unemployment rate dipped to 5.4 percent from 5.5 percent in the previous month, falling to its lowest level since October 2001.

The latest report "is consistent with continued economic expansion," said Treasury Secretary John Snow shortly after the release of the data. "The 144,000 added in August, combined with upward revisions for June and July, brings the total to 1.7 million new jobs since this time last year," he added.

The Treasury secretary made a point of stressing that the manufacturing sector was gaining momentum, as 22,000 of the 144,000 jobs were created in the manufacturing industry. Manufacturers had been particularly hard hit by the economic recession of 2001, and economists have been concerned that while the overall economy started improving from last year, the manufacturing industry remained sluggish. So the fact that 107,000 manufacturing jobs have been created since this January has been especially heartening for the Bush administration.

Meanwhile, the commissioner of the Bureau of Labor Statistics, Kathleen Utgoff, said that "since its recent low point in August 2003 ... a little more than half of (the jobs) growth occurred from March through May of this year."

But over the past 3 1/2 years that Bush has been in office, a net total of 913,000 jobs have been lost under his watch, a fact that has not been lost on Democratic Party presidential hopeful John Kerry.

"President Bush is now certain to be the first president since the Great Depression to face re-election without creating a single job," the Massachusetts senator said in a release. "If you believe lost jobs mean that America is heading in the right direction, you should support George Bush and his policies of failure."

Economists, meanwhile, are neither as euphoric nor as pessimistic about the latest numbers as the politicians.

"We're creating jobs, but not at a pace that will make job seekers very happy," said Joel Naroff, chief economist at Naroff Economic Advisors. He pointed out that about 20 percent of the job gains were from auto workers returning to work, and also noted that the biggest jobs increase came in medical care and social services, which go up regardless of the state of the economy.

"In contrast, retailers are still cutting back on payrolls, which is not a signal that consumers hit the malls heavily during the month," Naroff said.

Meanwhile, an economics professor at the University of Maryland, Peter Morici, argued that at least 150,000 jobs must be created each month simply to keep up with the growth of the U.S. labor force, but the average number of jobs created each month since April is 104,000.

Lawrence Mishel, president of the Washington-based Economic Policy Institute, agreed.

"This modest job growth is certainly better than the steady 100,000 per month decline we saw up to last summer, but it is barely enough to absorb a growing population's need for jobs," Mishel said.

So voters may not be as heartened by the latest data as the Bush administration might hope, economists said.

"Production cutbacks at Ford and (General Motors), mediocre personal income growth, and record trade deficits all bode poorly for economic growth and jobs creation," the University of Maryland's Morici argued, adding that "President Bush faces a daunting task persuading voters in critical mid-western and southern battleground states that they live in prosperous times."

For Wall Street analysts, on the other hand, the question remains on whether the Federal Reserve will deem the economy hot enough to warrant another interest rate hike or whether it would be wiser to keep rates pat. The key federal funds target rate stands at 1.50 percent, and investors remain divided on whether the Fed will raise rate when policymakers meet later this month.

If the central bank determines that the economy continues to gain strength steadily, as could be said according to the latest jobs report, then it is more likely than not that the Fed will raise rates once again by another 25 basis points on Sept. 21. That will be the Fed's final meeting before the presidential elections.

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