Jobless rate drops to 6%

Tax cuts working, Bush says of Labor Dept. report

126,000 jobs added in October

November 08, 2003|By Bill Atkinson | Bill Atkinson,SUN STAFF

The strongest signal yet that the economy might be healthy enough to push unemployment lower came yesterday as the Labor Department reported that the unemployment rate fell a tenth of a percentage point to 6 percent and 126,000 new jobs were created in October.

But economists warned that it will take more than those positive numbers and yesterday's upward revisions in two prior job reports to fuel a significant decline in unemployment.

"People are viewing this report as booming, shockingly strong; it is nothing like that," said James Glassman, senior U.S. economist at J.P. Morgan Chase & Co. in New York. "It is still an anemic pace of hiring."

Still, White House officials lost no time trumpeting the news.

Treasury Secretary John W. Snow, who has predicted that the economy will add 2 million jobs before the November 2004 election, said the employment numbers are "encouraging and demonstrate growth in the economy."

Labor Secretary Elaine L. Chao said the administration is "optimistic, but not complacent."

And President Bush argued in a speech at a technical community college in North Carolina that his effort to spur the economy with sweeping tax cuts was working.

That state has lost more than 147,000 jobs, or 3.4 percent of its work force, since January 2001.

Many of those losses are in manufacturing, which continues to struggle nationwide. The country lost 24,000 manufacturing jobs in October, according to the Labor Department's report, and 2.6 million jobs since January 2001.

Unemployment will likely be a central economic issue in the 2004 presidential campaign, experts said. If it continues to fall, Bush has a good shot at being re-elected, they said.

"I think it [unemployment] is a key," said Sharon L. Stark, chief fixed-income strategist at Legg Mason Wood Walker Inc., a Baltimore-based asset management firm. "I think it gives the Bush administration a platform in which to launch their election campaign."

Charles W. McMillion, chief economist at MBG Information Services, a Washington-based business information analysis and forecasting firm, said job creation is strengthening, but he wondered whether the pace will continue.

"The question is, How sustainable is this? I don't think we know. I don't think it tells us anything about the future," McMillion said.

Some jobless uncounted

The number of unemployed workers totaled 8.78 million in October, down from 8.97 million in September. But there were an additional 1.6 million people who wanted jobs and were available for work but were not included in the survey.

Maryland's unemployment rate, which is not adjusted for seasonal changes, was 4.1 percent in September, flat from a year earlier. It was down from 4.2 percent in August, according to the state Department of Labor, Licensing and Regulation.

Glassman noted that a strengthening economy could make it more difficult for Democrats to take the White House.

"When the economy is performing well, the electorate tends to go with the status quo, they tend to give the sitting president the benefit of the doubt," he said. "In general, the U.S. economy is not doing terribly."

Indeed, the economy appears finally to be turning around since it came out of recession two years ago. It grew at a sizzling 7.2 percent annual pace in the third quarter, the fastest rate of growth in nearly two decades.

Economists expect that to slow to a more normal rate of growth, from 3 percent to 5 percent, but continue to march forward, adding more jobs as the months go by.

Industry experts were surprised not only by the employment surge in October but by the revised numbers in September and August.

The Labor Department said the economy added 125,000 workers in September, compared with 57,000 in its initial report. In August, the economy added 35,000 workers, compared with a reported loss of 41,000.

"This is terrific," said Ken Goldstein, an economist at the Conference Board, a New York-based research group that tracks consumer confidence.

The broad growth in employment is "suggestive that we are indeed starting to make a turn," he said. "One of the things that we have been cautioning ... is that we are on a road to recovery, but it is a bumpy road. These numbers on jobs in October, at least at one level, suggest that not all of the bumps are on the downside."

Despite yesterday's positive report, the stock market drifted lower, with the Dow Jones industrial average losing 47.18 points to close at 9,809.79. The broader Standard & Poor's 500 stock index lost 4.84 points to 1,053.21; and the Nasdaq composite index slipped 5.63 points to 1,970.74.

Among the bright spots in the Labor Department report was that a broad base of companies added employees to their payrolls.

Professional and business services added 43,000 jobs, health care and social assistance 34,000 jobs and ambulatory health care services 18,000 jobs. Food services and drinking establishments put 23,000 people on their payrolls.

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