Home > Employment gain in U.S. is slowing
New sign that the economy weakens, making problems for Bush campaign
NEW YORK Job growth ground nearly to a halt last month, the U.S. Labor Department reported Friday, in a new sign that the economy has weakened in recent months.
U.S. employers added just 32,000 jobs in July, a small fraction of forecasts and the smallest gain this year. The government also announced that job growth in May and June was less than initially estimated.
"It’s clear that the economy is hitting a soft patch," said Richard DeKaser, chief economist at National City, a bank based in Cleveland. "What we’re seeing is the severe impact of high oil prices."
The unemployment rate fell slightly, to 5.5 percent last month from 5.6 percent, but that figure is based on a smaller survey than the job growth numbers, which are widely considered the more reliable gauge of employment.
Stocks fell broadly after the release of the report, with the Standard Poor 500-stock index down 1.1 percent in late trading. The dollar tumbled more than 2 cents against the euro, and U.S. interest rates declined, although many economists continued to predict that the Federal Reserve would raise its benchmark short-term rate next week.
The new report creates a nettlesome political situation for President George W. Bush, who had pointed to the strong job gains this year as a result of tax cuts he had championed. The weak job growth of the past two months means that the president is now highly likely to run for re-election with an employment level lower than when he took office, the first time that has happened since Herbert Hoover lost to Franklin D. Roosevelt in 1932 amid Depression-era job losses far greater than any experienced in recent times.
"Today’s employment report shows our economy is continuing to move forward and it reminds us that we’re in a changing economy," Bush said at a campaign rally in Stratham, New Hampshire, Bloomberg News reported. "We’ve got more to do. I’m not going to be satisfied until everybody who wants work can find a job and I’m running because I understand how to take a strong economy and make it stronger."
Bush’s Democratic opponent in November, Senator John Kerry, pounced on the numbers.
"Today’s job numbers further demonstrate that our economy may be taking a U-turn," Kerry said in a statement released in Kansas City, Missouri. "America will not turn the corner to better days until we have a new president who can see our problems and take action to fix them."
The numbers are also likely to raise new fears that the relationship between economic growth and job creation has changed in important ways. With technology allowing companies to produce more goods without adding workers and some jobs moving to lower-wage countries, there are nearly a million fewer U.S. jobs now than there were in late 2001, when economic growth resumed.
Central bank policy makers next meet Tuesday, and economists and investors continue to predict that they will raise the benchmark rate a quarter percentage point, to 1.5 percent.
The Fed lowered the rate to an almost-50-year low last year to keep the economy from falling into a new downturn, and Alan Greenspan, the Federal Reserve board chairman, has said he planned to lift the rate gradually over the coming year.
The recent weak job growth raises the chances that the rate increases will come even more slowly than previously thought, analysts said.
Investors now expect the rate to reach 2 percent by February, according to the price of a futures contract tied to Fed policy; before the release of the jobs report, they had expected a rate of 2.25 percent by February.
Joshua Shapiro, an economist at MFR, a consulting firm in New York, called the employment report "terribly disappointing" in a letter to clients. Goldman Sachs said, "Obviously, these numbers are extremely weak and represent a big surprise."
Last month’s hiring slowdown occurred across most industries. For the first time this year, more industries cut jobs than added them, the government reported.
Helping to make up for the losses, manufacturers added 10,000 jobs, just the fifth positive month for the sector since the summer of 2000.
Hospitals and other health care companies continued their long rise in employment, meanwhile, and construction companies added jobs as well.
The best sign in an otherwise grim report may have been the gain in earnings for rank-and-file workers, who make up about 80 percent of the work force. Their average weekly pay rose $3.25, to $529.09, after dropping in June.
Over the past 12 months, though, weekly pay has risen only 2.4 percent - considerably less than inflation, which has been running above 3 percent.
In other positive signs, the average length of unemployment fell, as did the number of people saying they were working part-time because they could not find a full-time job.
As part of its regular revisions, the Labor Department said that the economy added 283,000 jobs in May and June. The previous estimate was a gain was 347,000 jobs.
S. Treasury secretary, John Snow, said Friday he was dissatisfied with July’s rate of job growth, but that it appeared overall economic expansion remained sound, Reuters reported from Pittsburgh.
"We’re not satisfied," Snow said. "We’re encouraged, though, by the fact that the unemployment rate came down."
In response to questions, Snow said he still expected the economy’s underlying strength to keep economic expansion intact in the second half.
Snow said the separate household survey of jobs, which showed strong job growth in July but is considered less reliable than the payroll measure, deserved study.
"The divergence between the household and the payrolls survey is very striking, and I’ll leave it to statisticians to try to reconcile those numbers," Snow said, "I suppose that the real number lies somewhere in between."
"There’s still some work to be done to reconcile the divergence between those two indices, but it does underscore" the need for modifying policy to encourage growth, he said.