Published on Friday, March 5, 2004 by the Financial Times/UK
Lack of New Jobs Deals Blow to US Economy
by Christopher Swann in Washington and Jennifer Hughes in New York
The US economy failed to create any new private sector jobs in February, dealing another blow to hopes that the labor market is on the road to recovery.
Total employment rose by just 21,000 in the month, well below forecasts of a rise of around 150,000. Take away the 21,000 government jobs created in February, and the job creation rate was zero.
Financial markets reacted swiftly to the news, pushing the dollar lower against the euro and leading to a sharp surge in global bond prices. The euro initially jumped from $1.218 to $1.234.
Marc Chandler, chief currency strategist at HSBC in New York, said that the dollar's recent revival now looked under threat.
Steven Poser, market strategist at Poser Global said there was "nothing, and I mean nothing, bullish in the results".
The figures are likely to alarm Republican strategists, who have been gearing up for November's presidential election. The sluggishness of the labor market has become a significant campaigning tool for Senator John Kerry, the de facto Democrat nominee for the presidency.
With just seven payroll releases remaining before votes are cast, the administration is running out of time to demonstrate that their economic policies have helped create jobs.
John Snow, the US Treasury secretary, said the economic fundamentals were still in place for a strong recovery, but he made no effort to conceal his disappointment with the employment figures.
"The administration is not satisfied with today's job creation numbers," he said.
Even the most bullish economists failed to find much good news in the detail of the figures. January's employment creation rate of 112,000 - which disappointed many analysts at the time - was revised still lower to 97,000. Most of the job creation in February was in temporary positions, where there was a rise of 32,000. As a result the US actually lost permanent positions during the month.
With economists forecasting economic growth of around 5 per cent in the first three months of the year, the long-standing refusal of companies to hire new permanent workers has surprised most commentators.
"The clear message of these figures is that companies have been able to crank up output without the need for new workers," said Nigel Gault, director of US research at Global Insight, the economic consultancy.
The unemployment rate remained stable at 5.6 per cent. But the low level of unemployment is partly due to the result of disappointed job seekers abandoning their search for work, economists said. Over the month the civilian labor force fell by 392,000 to 146.5m, and the participation rate fell from 66.1 to 65.9 per cent.
The only scrap of comfort offered by the figures came for the manufacturing sector. Last year the sector lost an average of 48,000 jobs a month. In February the level of job losses slowed to just 3,000.
Copyright © 2004 The Financial Times Limited.