Video: Bush camp reacts to jobs report

By Martin Wolk Executive business editor
msnbc.com
updated 10/8/2004 6:22:43 PM ET 2004-10-08T22:22:43

In a report seen as a political blow to President Bush, the Labor Department said Friday the economy added just 96,000 jobs last month, far fewer than projected. The final  monthly employment report before the Nov. 2 presidential election fell short of estimates it would show about 158,000 new jobs, although the unemployment rate remained unchanged at 5.4 percent, as expected.

The report kept alive one of the principal economic complaints of Democratic Sen. John Kerry in his campaign to unseat the incumbent Republican. Even after accounting for an announced upward revision, the economy has shed more than 600,000 jobs since Bush took office, making it likely he will be the first president since Hoover to preside over a four-year term of net job losses.

The spin machines of both campaigns quickly went into high gear.

The Kerry campaign issued a nine-page paper comparing Bush’s record on jobs with previous recoveries and with the administration’s own projections.

“Even over this last year, our economy has failed to create even enough jobs to cover new workers coming into the job market, not to speak of the millions who are unemployed, working in part-time or temporary jobs or who have given up and dropped out,” Kerry said in a statement issued by his campaign.

Kerry was in St. Louis preparing for Friday’s town hall-style presidential debate, where he was virtually certain to bring up the latest employment figures as evidence of what he describes as Bush’s failed economic record.

Bush administration officials sought to find bright spots in the report, including an annual revision that showed the economy added about 236,000 more jobs this year than previously estimated.

Stephen Friedman, director of Bush’s National Economic Council, said rising productivity and a “just-in-time hiring mentality” were contributing to the slow expansion of the work force.

But he said the unemployment rate is low and the economy “is moving forward in a very strong and steady fashion.”

“You would always rather have higher numbers than lower numbers, but I would characterize it as 13 months of steady improvement,” he said in a CNBC interview. “With further growth in GDP, which is clearly being predicted, we’ll start to see higher job numbers coming forward in the future.”

In the first three years of the Bush administration, the economy lost more than 2.4 million jobs — losses that continued long after the recession formally ended in November 2001. Manufacturing was especially hard-hit, meaning significant economic pain in key battleground states like Michigan, Pennsylvania and Ohio.

Major Market Indices

Over the past year, economic data generally have turned in Bush’s favor, as the combination of tax cuts and low interest rates gave the economy a strong boost in the second half of last year. About 1.8 million jobs have been added to U.S. payrolls over the past 13 months, bringing down the unemployment rate from a peak of 6.3 percent last year.

But the economy hit another “soft patch” this summer, blamed in part on soaring energy prices. That has added to business uncertainty and caution, analysts said.

“Businesses know it’s still a very uncertain climate — uncertain international climate,  uncertain political climate, uncertain fiscal climate,” said David Rosenberg, chief North American economist at Merrill Lynch. “Companies are trying to retain as much flexibility as possible.”

Rising oil prices raise the prospect of another economic soft patch next year, said Nigel Gault, an economist with Global Insight, a research firm. 

“If employment is growing rapidly you can offset (higher oil prices),” he said. “What these numbers are showing is that employment isn’t growing rapidly.”

Still, there was little change in expectations that the Federal Reserve will continue to raise short-term interest rates. The Fed has raised the benchmark overnight lending right to 1.75 percent from an unusually low 1 percent over the past four months and is expected to raise the rate another quarter point Nov. 10.

The Fed is trying to “normalize” interest rates after cutting them to prevent a potential outbreak of downwardly spiraling prices that appears to have passed, said Gault.

“I have no doubt that the economic data has not been as good as the Fed had hoped,” he said. “But the data have not been bad enough that it has to stop its normalization right now."

Stock prices fell sharply, pressured by the weak employment report and high  oil prices. Bond prices rallied, sending long-term market interest rates lower.

There was little good news in Friday’s report, which is closely watched by financial market’s as the government’s first major report on how the economy did last month. Manufacturing employment fell by 18,000 and retail employment fell by 14,000 after adjusting for normal seasonal fluctuations.

Four hurricanes that struck Florida and other coastal states appear to have held down employment growth, "but not enough to change materially the Bureau's assessment of the employment situation in September," according to a note from the Bureau of Labor Statistics.

Rich Yamarone, director of economic research at Argus Research, called the latest report "lackluster" and said the slow employment growth reflected structural changes since the 9/11 terrorist attacks three years ago.

"U.S. labor market conditions have undergone a paradigm shift that has forced businesses to rethink the pace of hiring, the composition of their respective workforces, salary and wage levels and where employees work," he said.

Average weekly hours were unchanged last month, and the manufacturing workweek fell by 0.1 hour. Average hourly wages have risen 2.4 percent over the past year, a bit slower than inflation, although average weekly wages are up 3 percent.

“One of the other disturbing numbers was the sharp rise in the average duration of unemployment to 19.6 weeks,” said David Wyss, chief economist for Standard & Poor’s. “The good news is that layoffs have been cut back, things have stabilized. But we’re still not seeing much hiring. The people who are out of work are staying out of work.”

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