U.S. employment growth went from bad to worse in February, providing little solace for the nation’s 8 million jobless and complicating President Bush’s re-election campaign.
Despite persistent signs of economic recovery, the Labor Department reported Friday that employers added only 21,000 jobs last month, a steep decline from January’s lukewarm gains.
The nation’s unemployment rate held steady at 5.6 percent, but that was mostly because a large number of people became sufficiently discouraged that they stopped looking for work.
The data showed that since November, 716,000 people have dropped out of the labor force. In addition, the average length of unemployment rose to 20.3 weeks in February, the highest rate in two decades.
“This clearly adds to the perception that there is a problem with the economy,” said John Silvia, chief economist for Wachovia Corp. “It is definitely a negative for the Bush administration.”
But the White House vigorously defended the president’s economic policies Friday, noting that there has been at least some job growth in each of the past six months.
“Today’s report underscores the importance of continuing on the path of the president’s pro-growth policies,” White House spokesman Scott McClellan said at Bush’s ranch in Crawford, Texas.
McClellan said Bush’s tax cuts have helped speed the economic recovery. He suggested that plans outlined by Sen. John Kerry (D-Mass.), the likely Democratic presidential nominee, to roll back some of those cuts would undermine the recovery.
“Either we continue to grow the economy and create new jobs through the president’s pro-growth, pro-jobs policies, or we raise taxes on families and small businesses and slow our economic recovery and future job creation,” McClellan said.
Democrats, however, noted that the administration recently had to back off a prediction that the economy would produce 2.6 million jobs this year, enough to wipe out all of the job losses incurred since Bush took office. And they were quick to make hay of Friday’s weak jobs report.
“For over three years now, George Bush has promised the American people that new jobs are on the way,” Kerry said. “But he’s over-promised and under-delivered.”
Amid the rhetoric, economists continued to puzzle over the lack of new jobs. Strong economic growth in the second half of last year seemed certain to boost hiring. The number of people filing for jobless claims has been falling for months. Business surveys show that factories are humming and that employers intend to hire. As a result, economists had predicted that the nation’s employers would generate at least 125,000 jobs in February.
Instead, a broad number of industries shed jobs, including manufacturing, which contracted for the 43rd consecutive month. Construction payrolls dropped by 24,000 jobs. Among the job gainers was the temporary-services industry, indicating only tepid confidence in hiring. The Labor Department also revised January’s gain of 112,000 jobs downward to 97,000.
Some economists said the drop in construction spending might indicate that bad winter weather contributed to the hiring drop. But others said that even if those jobs were included, the total wouldn’t have been enough to offset the number of people entering the job market.
Another troubling aspect of the report was a lack of substantial wage growth. Lee Price, of the Economic Policy Institute think tank in Washington, said that including a small gain in February, wages have risen only 1.6 percent over the last year, the slowest rate in the 40 years the data has been collected.
That may be because industries creating jobs these days pay less than industries contracting. From the end of 2001 to the end of 2003, according to the institute’s research, the industries losing jobs paid wages of $16.92 an hour on average, while the industries gaining jobs paid an average wage of $14.65.
Economists said the February report tends to confirm suspicions that cost cutting and the export of jobs overseas have wrought structural changes in the U.S. labor market.
The story is becoming familiar: Strong gains in productivity mean companies can avoid hiring, even as production increases.
Donald Washkewicz, chief executive of Parker Hannifin Corp. in Cleveland, said that’s exactly what’s going on at his company, a manufacturer of motion and control technologies. The extra-long downturn in the industrial sector, he explained, gave the company time to re-engineer how it does business.
“We have a system called `lean’–a new way of engineering our shop and office,” Washkewicz said. “It means we can do more with fewer people.”
Parker, which tends to mirror the industrial sector because it touches so many businesses, saw orders soar 20 percent in the past month. The trend has been pointing upward for the last four months. But because the company is so much more efficient, it hasn’t even put on a third shift in its factories.
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Parker is reluctant to hire more employees until it absolutely must.
“We spent $100 million to cut back 8,000 workers over the last few years,” Washkewicz said. “So we don’t want to add any back unless we’re sure we need them.”
The good news is, Washkewicz is feeling confident. He predicts Parker and other companies will be hiring in big numbers by summer as long as demand keeps up.
“I can guarantee you that we can’t take care of a 20 percent increase in business without some hiring.”