Published on Saturday, January 10, 2004 by the Baltimore Sun
Falling Jobless Figure Deceptive
14-Month Low Reflects Hundreds of Thousands Giving Up Search for Work
by Bill Atkinson
The nation's unemployment rate dropped sharply to a 14-month low in December, but underlying that positive number was grim economic news - only a handful of new jobs were created and hundreds of thousands of discouraged people dropped out of the work force.
"It's frustrating, to say the least," said William Holland, a 50-year-old, laid-off steelworker in Baltimore who has been unemployed for nearly three years. "I don't give up. I am sending out resumes, I am on the Internet, I am trying every avenue."
Although unemployment fell to 5.7 percent in December, down from 5.9 percent in the prior month, only 1,000 jobs were created, a shockingly low number in a recovery, according to the government's Bureau of Labor Statistics.
What's more, the work force, which typically grows when the economy advances, shrank as 309,000 people stopped looking for work.
The withdrawal of these work force dropouts from the job market pushed the unemployment rate down, despite the economy's failure to generate a significant number of new jobs.
"Ultimately, the real issue is job creation," said Joel Naroff, president of Naroff Economic Advisors in Holland, Pa. "That is where you get income, that is where you get demand. The report was a shocker, to say the least."
Naroff expected 100,000 jobs to be created, or at the very least 75,000. "It is almost impossible to understand what is truly going on," he said.
John E. Silvia, chief economist at Wachovia Corp., a Charlotte, N.C.-based banking company, had expected 150,000 jobs to be created in December.
"I was clearly disappointed with this report," he said. "This has to be a concern. It may be a one-month fluke, but I have to treat it as a concern. When do we catch up? I don't know. We may not catch up later."
The December numbers are a continuation of a long period of inadequate job creation.
The economy has lost more than 2 million jobs since employment peaked in February 2001, and gains in recent months have been minuscule.
The stock market reacted poorly to the news. The Dow Jones industrial average lost 133.55 points, or 1.26 percent, to close at 10,458.89.
The Standard & Poor's 500 stock index fell 10.06, or 0.89 percent, to 1,121.86, and the Nasdaq composite index, which is dominated by large technology companies, lost 13.33 points, or 0.63 percent, to 2,086.92.
Despite all that, President Bush lauded the economy in a Washington speech before women small business owners and said he is optimistic about its prospects: "This economy is strong, and it is getting stronger."
He noted that unemployment dropped, but he said the decline wasn't good enough.
"We want more people still working. But nevertheless, it is a positive sign that the economy is getting better," he said.
Treasury Secretary John W. Snow underscored the president's remarks, saying the administration "must continue our efforts to strengthen the environment for job creation."
"The fact is that while an index of manufacturing orders is at a 50-year high, construction spending is up, housing starts are at a 20-year high, retail sales are solid, and GDP [gross domestic product] growth is strong, the administration will not be satisfied until every American who wants a job can get one," Snow said in a release.
Creating more jobs is seen by experts as key for Bush's re-election effort.
"Politically, it [job creation] is obviously critical," Silvia said. The administration "can't rely on just tax cuts alone" to win voters' support.
Silvia said that if the economy creates 100,000 jobs a month on average, Bush could be unbeatable this November.
"I think the economy is still a plus for President Bush," said Sung Won Sohn, chief economist at Minneapolis-based Wells Fargo & Co. "I think the Bush administration will try to emphasize the jobless rate and the economy. He can put together a pretty good story that the economy is doing pretty well."
Bush's goal of providing a job for everyone who wants one won't be an easy one to meet, especially because companies have been reluctant to hire. It still takes 19.6 weeks for the average unemployed person to find a job, and 22.3 percent of unemployed workers have been looking for 27 weeks or longer.
Holland, the laid-off steelworker, has gone back to school, earning a degree from a technical college.
"I have got extensive computer skills and office training," he said.
Holland gets up about 5:30 each morning and by 6:30 a.m. he's hunting for work, either at the Goodwill Industries in Baltimore or at a career center in the city.
And Carol Fletez, 57, a computer database specialist, has been out of work for nine months, despite sending out about 500 resumes.
"It is tough to survive," said Fletez, who lives in Columbia, is married and has a grown daughter.
Three years ago, companies stopped investing in technology, she said, and jobs have been scarce. She used to earn more than $100,000 a year, but she has worked more recently for half that amount when she has found a job.
"We struggle to keep a positive attitude," she said.
The lackluster job market isn't confined to one or two segments of the economy, according to the BLS report.
Retailers, including sporting goods, music and book stores as well as gas stations, trimmed 38,000 jobs in December, surprising experts because companies typically add workers during the holiday season. Leisure and hospitality industries cut 4,000 jobs, and government trimmed workers, too. Manufacturers, which have lost 2.8 million jobs since July 2000, lost an additional 26,000 jobs.
Many economists expect hiring to pick up.
Ken Goldstein, at the Conference Board, a New York-based research group that tracks consumer confidence, predicted that by springtime 100,000 new jobs a month will be "normal."
"We are probably going to get back to at least 50,000 in January and 100,000 in March or April," he said.
"That is where we are going."
Holland and Fletez hope that Goldstein is right and that they will find work as hiring increases.
This week, Fletez received three phone calls about potential jobs, so she is optimistic that something good will happen soon.
"I'm very hopeful," Fletez said. "You use those kinds of things ... to make yourself feel better."
Copyright © 2004, The Baltimore Sun