Jobless rate dips to 5.6%, a 2-year low

112,000 jobs added in Jan., fewer than anticipated

`It is a little disappointing'

Wall Street, however, finds numbers not so bad

February 07, 2004|By Bill Atkinson | Bill Atkinson,SUN STAFF

The nation's lackluster job market showed signs of strength yesterday as unemployment dipped a tenth of a percentage point to 5.6 percent, its lowest level in about two years, and 112,000 jobs were added to payrolls in January.

Economists, who expected 175,000 new jobs, were mildly disappointed with the results.

"It was a little worse than expected, but overall it was a better number than we have been seeing," said David A. Wyss, chief economist at Standard & Poor's in New York.

"It is a little disappointing," added James Glassman, senior U.S. economist at J.P. Morgan Chase & Co. in New York, who was expecting 125,000 jobs in the month. "It is not so slow you can say it is totally dysfunctional."

Bush administration officials lauded the results, which were released by the Labor Department, saying the steadily falling unemployment rate and job gains are signs that the economy is gaining momentum.

"We are seeing solid gains in the underlying fundamentals," said Treasury Secretary John Snow. "I'm pleased by the strength of the recovery under way, but not satisfied."

Indeed, most basic economic indicators are showing strength, experts say. Gross domestic product, or the total output of goods and services produced in the United States, grew at a healthy 4 percent clip in the fourth quarter; worker productivity is growing; factory orders are brisk; and consumer confidence is rising.

Yet, job growth has been weak, disappointing many economists who have been expecting jobs to grow in the range of 150,000 to 200,000 a month.

The 112,000 jobs gained in January mark the largest increase since December 2000, when 124,000 jobs were added. Since August, companies have hired just 366,000 workers.

More than 2 million jobs have been lost since President Bush took office in 2000, and employment levels are expected to be a featured issue in this November's presidential election. "The bottom line is jobs," Wyss said. "The real question is, `Do I have a job? Do I feel secure in it?'"

What baffles economists is why the unemployment rate continues to fall yet job growth remains weak.

At the heart of the puzzle are two surveys put out by the Bureau of Labor Statistics that measure unemployment and job growth.

One, called the establishment survey, captures net job changes at 400,000 companies. It is a comprehensive survey that claims 112,000 jobs were added in January.

A separate household survey, which is used to determine the unemployment rate and is based on data from interviews with 60,000 households, indicates the economy added 496,000 jobs in the month.

"It is a strange picture unfolding here in the labor market," Glassman said. "I think the two surveys are sending slightly different messages and when they do you are supposed to respect both."

Kenneth Mayland, an economist at ClearView Economics in Pepper Pike, Ohio, believes the household survey's results. He says that survey counts outside contractors and employees at small companies that the establishment survey misses.

"This was a good employment report," Mayland said. "There is job growth if you look at the household numbers and there is no reason not to believe them."

The two surveys generally follow each other, but they have diverged because the nation's work force is undergoing a rapid transformation, some economists say. They believe that more people are working as consultants and independent contractors and they are not counted in the establishment survey.

"There is truly a fundamental change going on in the American corporate workplace and it is outsourcing," Mayland said.

While yesterday's employment news was not a good as expected, the stock market rose, with the Dow Jones industrial average rising 97 points to 10,593.

The Labor Department said unemployed workers totaled 8.29 million in January, down from 8.39 million the previous month. There were an additional 1.7 million people who wanted jobs and were available for work but were not included in the survey because they were not actively seeking employment.

Maryland's unemployment rate bumped up in December to 4.4 percent from 4.2 percent, an increase reflecting a return to the job market of significant numbers of these so-called discouraged workers, according to the state Department of Labor, Licensing and Regulation.

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