Analysis: Job market not as strong as hoped

By SHIHOKO GOTO, UPI Senior Business Correspondent  |  Dec. 3, 2004 at 12:34 PM
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WASHINGTON, Dec. 3 (UPI) -- Disappointingly few jobs were created in November, but the Bush administration remains upbeat about the U.S. labor market.

The Bureau of Labor Statistics reported early Friday that only 112,000 jobs were created last month, far below the Wall Street consensus of about 180,000 new non-farm payroll positions. It was also considerably weaker than the 303,000 job-growth figure posted in October, which the BLS revised down from its preliminary estimate of 337,000.

The new data led to a slight sell-off in financial markets in early morning trade Friday.

Granted, the surge in job growth in October was largely a result of an increase in construction jobs following the hurricanes that hit Florida and other parts of the southern United States in August and September. As such, economists did not expect the same pace of growth to continue in November. Nevertheless, the weak non-farm payroll data was a disappointment to many on Wall Street.

Still, some investors were comforted by the fact that while job creation did not meet expectations, the unemployment rate dipped from the earlier month from 5.5 percent to 5.4 percent even as job creation shrank, as the household survey is calculated differently from the payroll data. Meanwhile, the BLS found that hourly earnings for workers rose by a penny from the previous month, having increased by 4 cents in October, to $15.83.

Some economists argue that the household survey is a more reliable indicator of the job market than the payrolls data.

"The household survey captures true job growth more effectively than the payroll survey because it includes the self-employed and is more sensitive to small-business growth," said Brian Wesbury, chief economist at investment group Griffin, Kubik, Stephens & Thompson. "The economy has performed better than payroll data have suggested. We suspect that this trend will continue," he added.

Certainly, the fact that the jobless rate dipped slightly while hourly wages inched up a tad provided much comfort to the U.S. Treasury Secretary. In a statement released shortly after the jobs data were unveiled, John Snow said that the latest numbers "are a confirmation that the American economy is on a steady growth path. ... This is the 15th consecutive month of job creation.

"This is a clear sign that the president's economic policies are working the way they were intended. By putting more money into taxpayers' pockets and enhancing the incentive to work and invest, his tax cuts continue to lead economic growth and good job creation," Snow added.

The healthcare and assistance sectors, as well as other service-providing industries, saw the biggest gains in November, adding 28,000 new positions in the latest month alone. Over the past 12 months the industry added 316,000 new jobs, with growth particularly strong in doctors' offices, hospitals, nursing, and residential care facilities.

Looking at the overall job market, the head of the BLS, Kathleen Utgoff said, "Since its most recent low point in August 2003, payroll employment has increased by 2.3 million, or 152,000 per month."

Such optimism about the labor market led financial markets to recover from their earlier losses. By late morning trade Friday, the Dow Jones had risen 26.38 points to 10,611.50, while the Nasdaq was up 9.45 to 2,153.02.

Economists broadly agree that the United States must create at least 150,000 jobs each month just to keep up with the number of new workers joining the labor force. As such, the 112,000 increase in November is not sufficient to provide jobs to all who are seeking to work.

"With faltering job and wage growth, the labor market looks weak, which will constrain consumption growth in the future," warned the head of the Economic Policy Institute, Lawrence Mishel.

Looking ahead, economists expect more jobs to be created in December, as there will be a surge in seasonal jobs to meet holiday-season demands. But some fear that the holiday market will not be as strong as workers hope.

"The specter of a winter jobs drought looms large and frightening," said Peter Morici, an economics professor at the University of Maryland.

"Retail sales, outside the auto sector, are up only modestly. Many of the goods sold at stores ranging from Wal-Marts to Saks Fifth Avenue are imports, creating more jobs abroad, especially in China and elsewhere in Asia than here," he added.

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