Growth in Jobs Is Still Sluggish Despite Forecast

Saturday, March 6, 2004
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By David Leonhardt

New York Times Writer

Since June, the Fed has kept its benchmark lending rate at 1 percent, a 50-year low, in an effort to encourage spending and shock the economy out of what has turned out to be — while many degrees milder than the Depression — the longest employment slump since the 1930's. After the release of yesterday's report, investors bet that the rate was likely to remain at 1 percent until at least the fall, based on the price of a futures contract tied to the benchmark rate. "The pace of job growth remains well below anything approaching what the Fed would need to see to consider raising rates," Drew T. Matus, an economist at Lehman Brothers, wrote to clients. "The clock is currently not even plugged in."

NYT
Job creation all but stalled in February, surprising Wall Street forecasters and giving Democrats economic ammunition to use against President Bush as he begins his re-election campaign.

The economy added just 21,000 jobs last month, down sharply from January's increase and far below the gains that were common in the 1980's and 1990's. The unemployment rate held steady at 5.6 percent, the Labor Department reported yesterday, but mostly because many people have stopped looking for work since late last year, removing them from the government's official count of the jobless.

"This is a disappointment," said Richard D. Rippe, chief economist of the Prudential Equity Group. "It shows very sluggish job creation in an economy which by almost all other measures is really doing very well."

With the slump in the job market nearing its third anniversary, economists said they were starting to wonder whether the relationship between economic growth and employment had changed in important ways. At no other point since World War II has the economy grown for such a long period without adding jobs at a healthy pace.

The failure of the economy to add more jobs so far presents Mr. Bush with a prickly political problem. Last year, he and his aides predicted that the three tax cuts passed since he took office would lift the economy out of its torpor and restore vigorous job growth.

In October, Treasury Secretary John W. Snow estimated that 200,000 jobs a month would be created over the coming 12 months; since then, the economy has added just 52,000 jobs a month on average, and the administration has distanced itself from the forecasts.

"We're not satisfied," N. Gregory Mankiw, chairman of President Bush's Council of Economic Advisers, said in a telephone interview yesterday. "The labor market has started to turn — it just hasn't turned enough." Mr. Mankiw said that raising taxes now, as Senator John Kerry, the presumptive Democratic presidential nominee, has proposed doing on families that make more than $200,000, would only weaken the economy further.

Democrats responded that the Bush administration had tried stimulating the economy with little but tax cuts for high earners and that the strategy had not worked.

"You would think that after spending almost $3 trillion, you'd get more than 21,000 jobs," said Representative Rahm Emanuel, Democrat of Illinois. "The president has not only a fiscal deficit, but a jobs deficit and a credibility deficit."

(More: NYTimes.com / Business)

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Dan