U.S. job increase finally turns up

Long-anticipated growth, fastest in 4 years, buoys markets, administration

April 03, 2004|By Bill Atkinson | Bill Atkinson,SUN STAFF

In the strongest signal yet that the economy's recovery is in full swing, businesses added a stunning 308,000 new jobs in March, marking the fastest rate of growth in four years and giving President Bush's re-election effort a significant boost.

Despite the surge, the nation's unemployment rate edged up a tenth of a percentage point to 5.7 percent as more workers entered the job market, the Labor Department reported.

The news sent the Dow Jones industrial average up 97.26 points to 10,470.59.

The Standard & Poor's 500 stock index rose 9.64 points to 1,141.81, and the Nasdaq composite index jumped 42.16 points to 2,057.17.

Economists, who have been perplexed for months over the trickle of new jobs, were relieved that their predictions of stronger growth finally came true.

Most expect the economy to continue to add jobs but at a slower pace.

"It is a big deal," said Stephen L. Stanley, chief economist at RBS Greenwich Capital in Greenwich, Conn. "It was such a tremendously strong number.

"But I don't think you can just declare victory after one month of strong data."

The hiring burst energized Bush administration officials, who were out in force yesterday cheering the results.

For months, they have been praising Bush's tax cuts for stimulating the economy.

But they have been frustrated because relatively few new jobs have been created and the number of people dropping out of the work force has been rising.

More than 8 million people remain unemployed, and 2.6 million people have lost jobs since Bush became president in January 2001.

The president and key aides highlighted the positives yesterday.

The labor market, they noted, has grown for seven consecutive months, unemployment is down from its June peak of 6.3 percent and 759,000 jobs have been created since August.

"You can understand why I'm optimistic when I cite these statistics because I remember what we have been through," Bush told an audience at Marshall Community and Technical College in Huntington, W. Va.

"We're getting better, and that's important. The tax relief we passed is working. It's making a difference for this economy."

Election issue

Sen. John Kerry, the presumptive Democratic nominee in a presidential campaign against Bush, called the results welcome news for workers after "three years of punishing job losses."

"I hope it continues," Kerry said.

"But for too many families, living through the worst job recovery since the Great Depression has been, and continues to be, far too painful."

Jobs and the health of the economy have emerged as a key issue in early campaigning, with Kerry and other Democrats hitting Bush hard for lackluster employment growth.

If the strong March growth is repeated in coming months, the Democrats' position could weaken.

"Clearly, it gives Bush some breathing room," said Thomas Melcher, chief investment officer at PNC Advisors in Philadelphia.

"If it is a trend that is building ... the economy will become less and less of an issue for the Bush camp."

Hard on Kerry

Stanley agreed. "This is the best news the administration has seen in a long, long time," he said. "If the jobs numbers continue, it is going to be awfully hard for Senator Kerry to win."

Economists assessing the economic recovery had been waiting for this day, and many now believe all the pieces are in place for sustained robust growth.

"This is not a window; we are now looking at a new trend," said Ken Goldstein, an economist at the Conference Board, a New York-based research group that tracks consumer confidence.

"Not that we are going to get 300,000 [new jobs] a month; we might get half of that, and we will be really happy."

The surge in jobs reinforced Goldstein's belief that the economy is in a "strong recovery."

He expects it to grow at 5 percent in the first quarter and possibly as fast in the second quarter.

"If we get a follow-up on this [jobs growth] number next month, we should be hitting on all cylinders," said Carl R. Tannenbaum, chief economist at LaSalle/ABN AMRO Bank in Chicago. "I don't think it was a fluke.

"Corporate profits are just out of sight; there is room in budgets to start adding people. Maybe we have turned the corner."

Tannenbaum expects the Federal Reserve to weigh job growth carefully and raise interest rates if gains continue. Some economists expect the Fed to increase as early as June.

"Based on the upbeat news on unemployment, the possibility that the Fed will raise interest rates later this year has risen quite a bit today," Tannenbaum said.

"I think that action will be taken before the election. I don't think it will be huge."

Bond prices down

The possibility that interest rates will rise sent bond prices spiraling downward in trading yesterday.

While the employment outlook appears to be brightening for more workers, not everyone is certain that the economy is in full recovery and that jobs will be plentiful.

Lawrence Mishel, president of the Economic Policy Institute, a liberal think-tank in Washington, said future employment gains remain uncertain.

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