Growth in jobs falters in June

112,000 new positions are half what was forecast

`It was genuine sort of surprise'

Figures for April and May are revised downward

July 03, 2004|By Jamie Smith Hopkins | Jamie Smith Hopkins,SUN STAFF

America's restarted employment engine sputtered last month, producing half as many new jobs as expected.

Businesses created 112,000 positions in June, the second-lowest month this year, and down considerably from the 235,000 new jobs in May, the Labor Department reported yesterday. Hiring in the booming construction industry stalled, while manufacturing cut back after several months of gains.

Unemployment held steady at 5.6 percent.

April and May weren't quite as good as the Labor Department initially estimated, either. The agency revised those job-creation figures downward yesterday by 35,000 combined. It's not the most welcome news for President Bush, whose re-election may hinge on the performance of the economy in the final months of the campaign.

Andrew Hodge, group managing director of North American economics for Global Insight in Pennsylvania, called the numbers a "disappointment."

"Job generation has been cranking up to better levels, but the takeoff path looks a little slower than it did before," said Hodge, who had anticipated about 240,000 new jobs. "It was a genuine sort of surprise."

Mark Vitner, senior economist at Wachovia, the North Carolina-based financial services company, was more enthusiastic.

"From time to time, we're going to see a rogue number," he said. "It looked like the weather probably held some hiring back in June. We think that when we get the July figures in about a month, we're going to see a surprisingly strong number that will more than make up for any softness we see here."

On Wall Street, the Dow Jones industrial average fell 51.33 points to 10,282.83; the Nasdaq composite index dropped 8.89 points to 2,006.66; and the Standard & Poor's 500 index inched down 3.56 points to 1,125.38.

Job seekers face a far better situation now than they did a year ago. U.S. employment numbers have risen for 10 straight months, up nearly 1.3 million just this year. That has made up for a little more than half the job losses since the recession hit three years ago.

Wachovia expects to see an average of 270,000 jobs added per month for the rest of the decade. If so, employment would return to January 2001 levels in October - and be reported Nov. 5, three days after the election.

Both major political parties were quick to put their spin on the statistics.

"With more than a million new jobs in the last four months, these numbers show that the trend is our friend," Commerce Secretary Donald L. Evans said in a statement yesterday. "The president's economic plan is working."

Josh White, executive director of the Maryland Democratic Party, said "there's far fewer jobs than expected."

"Bush continues to fail the Reagan test," he said. "We're not better off now than we were four years ago."

Job creation has been a key battleground. Two mid-June polls, one for ABC News and The Washington Post, the other for Fox News, showed that slightly more voters favored presumptive Democratic nominee John Kerry on economic issues.

Hodge said job creation and the economy are "critical" in presidential elections and usually dominate. But he said he thinks average voters care more about current trends than the number of jobs now vs. then.

"While this can't be good news for the Bush campaign to hear a lower trajectory of recovery, I think the economy still is taking off," he said. "Consumers are going to feel better, and voters are going to feel better about things on the economic side in November than they [do] now."

The larger problem is that employment growth doesn't compare well with the end of the boom years, said Peter Morici, a business professor at the University of Maryland and a former economist for the U.S. International Trade Commission, an independent federal agency.

If labor force participation had not dropped since 2000, the jobless rate would be about 7 percent, he said.

"If you look at where unemployment is worse, it's worst in the very places where the election is going to be slugged out," he said. "The good employment numbers are isolated on the two coasts, by and large."

Michael McDonald, a visiting fellow at the centrist Brookings Institution who researches voter turnout, expects to see Bush trumpeting examples of expanding local businesses to focus voters on recent gains as he campaigns through the heartland.

"It's such a close election that it's very important for the people who haven't made up their mind yet," he said of the job numbers.

About 8.2 million Americans were unemployed last month, the same as in May, the Labor Department said. About 305,000 people joined the labor force in June and nearly 260,000 found jobs, according to the department's survey of households. The employment growth numbers come from a separate survey of businesses.

Average hourly wages for production workers rose by 2 cents, compared with increases of 3 to 4 cents earlier this year, the department reported.

Manufacturing and government were the only sectors that cut jobs - 11,000 and 5,000, respectively. New orders for manufactured goods dropped by three-tenths of a percent in May, after a larger decrease the month before, the Commerce Department said yesterday.

Professional and business services added 39,000 jobs; employment in education and health services swelled 37,000; leisure and hospitality gained 8,000; and retail produced 7,000.

The statistics are adjusted for seasonal variations.

Brian Salkowski, the Mid-Atlantic area director for Ajilon Professional Staffing, an international recruitment firm, said the hiring managers who had been hiding behind closed doors for the past two years have started looking for applicants again.

It's not 2000, he said, but he thinks things are getting better.

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