Jobs report raises recovery concerns
By Michael Oneal
Tribune staff reporter
Published October 8, 2004, 1:47 PM CDT
While the job market showed some pickup in the spring, the latest employment report today shows it stalled again over the summer. That poses difficult questions about the true, underlying strength of the three-year economic recovery.
"It tells you that the mantra for business is still caution," said Sung Won Sohn, chief economist for Wells Fargo in Minneapolis. "I think it's quite disappointing."
In the last jobs report before the November presidential election, the Labor Department reported today that companies added only 96,000 jobs during the month, well below the 150,000 economists say are needed to keep up with population growth.
Over the prior three months, employers added only 103,000 jobs a month on average.
And though there appeared to be some improvement in the job market's momentum in August, the Bureau of Labor Statistics revised downward its earlier estimate for the month.
Most economists have been hoping that the summer doldrums were a "soft spot." That has been the mantra of Federal Reserve Chairman Alan Greenspan over the last several weeks.
However, those hopes are largely based on expectations that improved business spending will pick up the slack for slowing consumer activity. And if businesses aren't willing to hire, that raises disturbing questions about their willingness to spend.
Faced with all the global uncertainty, Sohn believes, "businesses are sitting on the sidelines right now waiting until the smoke clears. There's no reason to hire right now so they aren't. It's a Catch-22."
The new numbers indicate that 128,000 jobs were created in August, rather than the 144,000 originally thought. In July, the economy added 12,000 more jobs than originally estimated, but that still added up to only 85,000 new jobs.
The payroll report showed that 109,000 service-producing jobs were added last month. Construction jobs increased by 4,000 but manufacturing suffered an 18,000 loss in payroll employment. The National Association of Manufacturing called the factory job decreases "likely temporary."
Today's data did supply some good news. Labor revised upward its estimate for the period from March 2003 to March 2004, saying the economy added 236,000 more jobs than originally thought.
The report also suggested that there was continued strength in financial activities and professional/technical services.
Those glimmers were overshadowed, however, by substantial declines in manufacturing and retail employment.
Those sectors lost 18,000 and 15,000 jobs, respectively. The manufacturing drop off was particularly disappointing given that factories had been finally adding jobs at a reasonable clip this spring. Since then, factory hiring has been grim and the hours worked in the sector fell during the month.
Average hourly earnings rose 3 cents to $15.78 in September, but "factoring in inflation and rising health care premiums and co-payments, workers' real incomes continue to fall," said Peter Morici, an economist at the University of Maryland business school.
"The erosion of real wages," Morici added, "is particularly alarming at time of such rising productivity, and indicates current economic policies are failing to deliver real benefits to the typical working American."
Many experts fear the economy may be vulnerable to headwinds provided by global uncertainty about terrorism, skyrocketing oil prices and the nation's towering fiscal deficit.
While business fundamentals are strong, the trend weakened over the summer months. There was evidence that consumers may have bought as many cars and houses as they can afford.
"A structural change is occurring in the labor market, partly because companies are scared of commitment, partly because of terrorism, oil prices and other uncertainties," said David Wyss, chief economist for Standard & Poor's.
Rather than taking on more workers and taking on costly fringe benefits, he said, companies are shifting more into using "just-in-time" contract and temporary workers. "This is the age of the virtual company," Wyss said.
Tribune senior correspondent William Neikirk contributed to this report. SOURCE
By Michael Oneal
Tribune staff reporter
Published October 8, 2004, 1:47 PM CDT
While the job market showed some pickup in the spring, the latest employment report today shows it stalled again over the summer. That poses difficult questions about the true, underlying strength of the three-year economic recovery.
"It tells you that the mantra for business is still caution," said Sung Won Sohn, chief economist for Wells Fargo in Minneapolis. "I think it's quite disappointing."
In the last jobs report before the November presidential election, the Labor Department reported today that companies added only 96,000 jobs during the month, well below the 150,000 economists say are needed to keep up with population growth.
Over the prior three months, employers added only 103,000 jobs a month on average.
And though there appeared to be some improvement in the job market's momentum in August, the Bureau of Labor Statistics revised downward its earlier estimate for the month.
Most economists have been hoping that the summer doldrums were a "soft spot." That has been the mantra of Federal Reserve Chairman Alan Greenspan over the last several weeks.
However, those hopes are largely based on expectations that improved business spending will pick up the slack for slowing consumer activity. And if businesses aren't willing to hire, that raises disturbing questions about their willingness to spend.
Faced with all the global uncertainty, Sohn believes, "businesses are sitting on the sidelines right now waiting until the smoke clears. There's no reason to hire right now so they aren't. It's a Catch-22."
The new numbers indicate that 128,000 jobs were created in August, rather than the 144,000 originally thought. In July, the economy added 12,000 more jobs than originally estimated, but that still added up to only 85,000 new jobs.
The payroll report showed that 109,000 service-producing jobs were added last month. Construction jobs increased by 4,000 but manufacturing suffered an 18,000 loss in payroll employment. The National Association of Manufacturing called the factory job decreases "likely temporary."
Today's data did supply some good news. Labor revised upward its estimate for the period from March 2003 to March 2004, saying the economy added 236,000 more jobs than originally thought.
The report also suggested that there was continued strength in financial activities and professional/technical services.
Those glimmers were overshadowed, however, by substantial declines in manufacturing and retail employment.
Those sectors lost 18,000 and 15,000 jobs, respectively. The manufacturing drop off was particularly disappointing given that factories had been finally adding jobs at a reasonable clip this spring. Since then, factory hiring has been grim and the hours worked in the sector fell during the month.
Average hourly earnings rose 3 cents to $15.78 in September, but "factoring in inflation and rising health care premiums and co-payments, workers' real incomes continue to fall," said Peter Morici, an economist at the University of Maryland business school.
"The erosion of real wages," Morici added, "is particularly alarming at time of such rising productivity, and indicates current economic policies are failing to deliver real benefits to the typical working American."
Many experts fear the economy may be vulnerable to headwinds provided by global uncertainty about terrorism, skyrocketing oil prices and the nation's towering fiscal deficit.
While business fundamentals are strong, the trend weakened over the summer months. There was evidence that consumers may have bought as many cars and houses as they can afford.
"A structural change is occurring in the labor market, partly because companies are scared of commitment, partly because of terrorism, oil prices and other uncertainties," said David Wyss, chief economist for Standard & Poor's.
Rather than taking on more workers and taking on costly fringe benefits, he said, companies are shifting more into using "just-in-time" contract and temporary workers. "This is the age of the virtual company," Wyss said.
Tribune senior correspondent William Neikirk contributed to this report. SOURCE