U.S. job growth in April lowers unemployment rate

Gains exceed predictions, reach into all sectors of economy, boost recovery

May 08, 2004|By Bill Atkinson | Bill Atkinson,SUN STAFF

The nation's economy appears to be hitting on all cylinders, adding 288,000 jobs in April and giving President Bush's re-election effort a boost at a time when the administration faces escalating criticism over the situation in Iraq.

The strong number helped push the nation's unemployment rate down a tenth of a percentage point, to 5.6 percent, even though more workers entered the job market, the Labor Department reported yesterday. Growth was across the board, and even the ravaged manufacturing sector bolstered payrolls.

The jobs increase was better than the 175,000 that economists had expected, and the good news was amplified by an upward revision of March job gains to 337,000, from the 308,000 initially reported.

"This is an all-systems-go hiring report," said Alan D. Levenson, chief economist at T. Rowe Price Associates, the Baltimore-based mutual fund company. "The [Federal Reserve] has been talking about wanting sustainable expansion; what makes an expansion sustainable is when labor is participating."

Yesterday's report means that more than half of the 1.1 million jobs added since August were created in the past two months - a sharp turnaround from a year ago, when jobs were still being lost. Now, many economists expect to see the pace of job growth accelerate.

"As far as I'm concerned, this is confirmation that we are in the midst of a full-blown expansion," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa. "There is no longer any weakness in the economy anywhere."

He said companies could add 200,000 to 250,000 jobs a month for the rest of the year: "This was the last piece of the puzzle. It is a very pretty picture."

Levenson added that a "labor market recovery of this kind of magnitude lends solidity to the expansion."

"I guess nobody is talking about outsourcing anymore," he said, referring to the white-collar workers who have lost jobs to workers in India, Canada and other countries.

The upbeat employment report reinforced expectations that the Federal Reserve will begin raising interest rates sooner rather than later, possibly as early as June. That prospect rattled Wall Street yesterday, sending the Dow Jones industrial average down 123.92 points, or 1.21 percent, to 10,117.34.

The Standard & Poor's 500 stock index slipped 15.30 points, or 1.37 percent, to 1,098.69. The Nasdaq composite index lost 19.78 points, or 1.02 percent, to 1,917.96.

"The economy is very solid. It probably doesn't need as much stimulus as it did a year ago," said Gary Thayer, chief economist at A.G. Edwards & Sons Inc. in St Louis.

He said the Fed could push the benchmark federal funds rate, now 1 percent - its lowest in about 45 years - to 3.0 or 3.5 percent by late next year.

"I think the Fed is going to go slow," Thayer said. "The key here to what the Fed is going to do is not the economy, it is [consumer] confidence. If confidence bounces back, [the Fed] will probably be more aggressive."

The Labor Department's report was welcome news to the Bush administration, which is under mounting pressure over its handling of the war in Iraq. This week, Bush apologized to the Iraqi people after pictures were disseminated showing prisoners being abused by U.S. soldiers.

Yesterday, administration officials credited the president's tax cuts with engineering the economy's turnaround.

In a speech yesterday at the Federal Reserve Bank of Chicago, Treasury Secretary John W. Snow said the economy has "turned the corner."

"I believe this economy has plenty of room to run without creating inflation," he said.

But he acknowledged that consumers are "facing some jarring prices on everyday purchases."

"Prices of gasoline, groceries and houses have increased, and they can be a strain on a household budget," Snow said.

Sen. John Kerry, the likely Democratic nominee for president, criticized Bush's record, saying the administration has presided over the worst job recovery since the Great Depression, with 2.2 million private-sector jobs lost and 8.1 million people out of work.

Kerry said he has a plan to create 10 million new jobs - a pace of 208,000 jobs a month - by rewarding companies that add jobs in the United States instead of moving them overseas.

Economists were impressed by the breadth of the job gains, which included increases in construction, retail trade, health care, leisure and hospitality, and manufacturing.

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