Video: White House reacts to jobs data

updated 9/3/2004 5:10:57 PM ET 2004-09-03T21:10:57

America’s employment picture improved in August, the U.S. Labor Department reported Friday, with the economy adding 144,000 jobs, a number that was slightly below the 150,000 number predicted by a consensus of economists, suggesting the slow and uneven labor market recovery continues.

The government said the economy in August created the largest number of new jobs since May and saw a 12th straight month of payrolls growth. June and July job creation data were revised upward and the nation’s jobless rate slipped to 5.4 percent, its lowest level since October 2001, although the decline came as some 152,000 Americans left the civilian labor force, suggesting job-seekers are abandoning the hunt for work.

“As far as employment growth goes, [the jobs report] was OK. Nothing good, but nothing terrible,” said economist Joel Naroff, president of Naroff Economic Advisors. “For job seekers, it’s an environment that provides them with some opportunities, but finding jobs is still not going to be that easy yet.”

The jobs report had little impact on the stock market Friday, but bond prices fell as traders apparently interpreted it as a sign of a moderately strengthening economy that may make stocks a more attractive investment. Trading volume on Wall Street has been extremely light this week, as many market professionals took the week off to avoid any disruptions associated with the Republican convention held in New York.

The latest snapshot of the U.S. jobs climate comes just two months before the presidential election, and it is likely to have an important bearing on the closely-fought campaign.

President George W. Bush, who hurried back to the campaign trail early Friday after accepting the Republican Party’s nomination for a second term Thursday , and his Democratic rival, Sen. John Kerry, joust frequently over the health of the economy and the availability of jobs.

The jobs report is the penultimate monthly employment survey before Americans go to the polls on Nov. 2. Some had speculated that a weak report could shift the focus of the presidential campaign away from terrorism and Sen. Kerry’s Vietnam War record to the state of the economic recovery, potentially benefiting the Democrat's campaign.

A strong report was expected to indicate economic stability, and so help the Republicans.

“This report is not so good and not so great, so I don’t think it will be a big boon for either candidate,” said Stanley. “But on the margin, it probably benefits the Bush Administration because they can tout the fact that the unemployment rate fell.”

Bush, Kerry spar on jobs
On the campaign trail Friday, Kerry sparred with President Bush over the meaning of the jobs figures as they plunged into a nine-week post-convention sprint toward Election Day.

The new employment report “shows that our economy is strong and getting stronger,” Bush said Friday at a campaign stop in Pennsylvania. “Our growing economy is spreading prosperity and opportunity and nothing will hold us back.”

Major Market Indices

The Kerry campaign, however, had a different view of what the latest employment figures mean for the economy. “Economically, after losing jobs, you’re supposed to have ever faster job growth to make up for it. That’s not what we’re getting. We’re getting mediocre, treading water job growth,” the campaign said in a statement.

Bush says his tax cuts have helped the economy rebound and that making those tax cuts permanent will spur more job creation. Kerry says Bush’s policies benefit the wealthy, squeeze the middle class and aren’t producing significant job growth. The economy has lost 913,000 jobs since Bush took office.

Economists said the in-line jobs data paint a more favorable picture for summer job growth, and while they leave unresolved for now whether the economy is successfully shaking off a June soft patch, on balance they mean the U.S. Federal Reserve is likely to continue with its policy of gradually ratcheting up interest rates from four-decade lows.

Fed policy-makers boosted rates by a quarter-percentage point in June and August, and had been expected to raise borrowing costs again in September to head off inflation and return interest rates to neutral levels. However, some on Wall Street had speculated that a weak August payrolls report might call the Fed’s rate-hike strategy into question.

“This report probably takes the notion that the Fed will not move in September off the table,” said Steve Stanley, noting that the market is now pricing in almost a 100 percent chance that the Fed will raise its benchmark federal funds rate by a quarter-point to 1.75 percent at its Sept. 21 meeting. That compares with an 82 percent chance on Thursday.

Encouraging economic signs
Although the growth in August payrolls was not stellar, the overall jobs report included some encouraging signs for the U.S. labor market said Stanley. Most notably, the government revised up its totals for June and July job creation. The anemic 32,000 number for job growth in July was raised to 73,000, which is still a lackluster number but an improvement, while June’s 78,000 number was increased to 96,000.

Other data in the jobs report point to a significant improvement in labor demand relative to June and July’s numbers, Stanley said. These include an unchanged 33.8-hour work week and labor income that continues to expand at a good clip, suggesting spending increases on the part of consumers, the lifeblood of economic growth.

“We're moving in the right direction, but there's still a fair amount of wood to chop to get to where we should be,” Stanley said. As the uncertainties that have dogged the economy over the last few months, including terrorism and higher oil prices, fade over the next few months, job gains will accelerate further at a pace of about 200,000 a month, he added.

Mark Vitner, senior economist at Wachovia Securities, pointed to other encouraging signs. The nation’s unemployment rate has fallen from a peak of 6.3 percent in June 2003 to 5.4 percent in August, he said. And consumer delinquency rates on home mortgages and credit card debt are falling — a good predictor of a declining unemployment rate, he added.

Contrary to economists’ predictions, the massive Hurricane Charley, which tore through Florida in August, had no impact on the August jobs data according to the commissioner of the department’s Bureau of Labor Statistics, Kathleen Utgoff. She said the storm hit late in the period during which the government conducted its monthly survey.

Reuters and the Associated Press contributed to this report.


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