News > Economy
Payroll growth disappoints
Jobless rate dips to 5.9%, though growth in payrolls is far weaker than economists had forecast.
December 5, 2003: 2:18 PM EST
By Mark Gongloff, CNN/Money Staff Writer

NEW YORK (CNN/Money) - U.S. employers remained cautious in November despite robust economic growth in late summer, adding meager numbers to their payrolls, according to a government report Friday that fell far short of Wall Street forecasts.

Payrolls outside the farm sector grew by 57,000 jobs, the Labor Department said, compared with a revised gain of 137,000 in October. The unemployment rate fell to 5.9 percent, the lowest level since March. Economists had forecast 150,000 new jobs and unemployment steady at 6 percent, on average, according to

The unemployment rate managed to fall despite the anemic job growth because the two numbers come from different surveys: unemployment from the department's survey of households, payroll numbers from a much wider sampling of businesses.

And while the unemployment rate edged lower, last month's sluggish payroll growth reinforces the notion that the Federal Reserve will be in no hurry to raise short-term interest rates, economists said. The central bank has said it would keep rates at the lowest in more than 40 years, in part due to concern about the job market's slow recovery.

"Today's employment report is like getting just the Christmas present you wanted, but two sizes too small," said Bill Cheney, chief economist at John Hancock Financial Services in Boston.

"Overall, we're still left wondering what to believe. With the economy growing rapidly, we clearly would have expected a much stronger rebound in the labor markets by now."

The economy grew at a blistering 8.2 percent rate in the third quarter and seems likely to grow at a still healthy 4 percent pace in the fourth quarter, according to many economists.

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U.S. Labor Secretary Chao goes into the details of Friday's unemployment report.

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But businesses have been able to generate that growth by pushing their current workers harder and using technology to produce more efficiently. As a result, productivity grew at a mind-boggling 9.4 percent rate in the third quarter, the government reported this week, the fastest pace in 20 years.

The mediocre labor market could be one reason why holiday shopping has not been quite as robust as some analysts had expected. While sales since Thanksgiving have been decent, reports from retailers show consumers are more cost-conscious than ever.

"You don't want people to be cautious if you want them to buy," said Delos Smith, economist with the Conference Board, a private research firm that publishes a monthly survey of consumer confidence. "You want them relaxed and saying their troubles are behind them. This (employment) report doesn't suggest that."

The political impact

Still, the labor market is in better shape than it was in the spring and early summer, when employers cut jobs for six straight months. Payrolls now have grown four months in a row, the longest stretch since August through November of 2002.

And other indicators are pointing to a job-market improvement, most notably a sharp drop in the number of new weekly jobless claims. Even Friday's report had hopeful signs, including the fact that nearly 55 percent of all industries added jobs in November, the highest rate since November 2000.


"All the data suggest the labor market is improving -- perhaps not as fast everyone would hope and want, but it's better than deteriorating," said Paul Kasriel, director of economic research at Northern Trust in Chicago.

But the job growth so far is unlikely to be much help to President Bush, whose re-election effort in 2004 depends in large part on how Americans feel about the economy, and the job market.

When pushing for tax cuts earlier this year, Bush promised his proposals would create 300,000 jobs a month. And more recently, Treasury Secretary John Snow suggested the economy could start adding 200,000 jobs a month in October.

So far, neither rate has been approached, and Friday's report seemed certain to draw fire from the left, including Democrats seeking to replace Bush.

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Passing the torch

"Millions of American workers still do not have jobs, and our nation has lost more jobs under the Bush administration than under any president since Hoover," said AFL-CIO President John Sweeney, who called for another extension of federal unemployment benefits, set to expire on Dec. 27.

Bush supporters noted the strength in the Labor Department's household survey, which generates the unemployment rate. It showed a gain of 589,000 people calling themselves "employed," hinting that many people may be self-employed or working for start-ups not counted in the department's separate survey of employers' payrolls.

"Both surveys portend much greater job creation in the future," Labor Secretary Elaine Chao told CNNfn.

On Wall Street, where many analysts expected a much better payroll number, stock prices fell. Treasury bond prices rose, pushing yields lower.

Fed still on hold

Bond traders were betting that the Fed, whose policy-makers meet Tuesday, won't be moving to raise rates any time soon, and might even promise again to hold them low for a "considerable period."

Federal Reserve

"This employment report means that the phrase 'considerable period' will stick around for a considerably longer period of time," said Anthony Chan, chief economist at Banc One Investment Advisors.

In its report, the department said payrolls in service industries, including education and health care, grew by 64,000 jobs in November. Goods-producing industries shed 7,000 jobs. Retailers shed 28,000 jobs, largely reflecting the impact of a strike at grocery stores in California.

The number of temporary workers rose by 21,000, the seventh straight monthly increase, which may point to more permanent hiring as business executives grow more confident about the economy. But some analysts noted businesses may be using temp workers to avoid full-time hiring.

Average hourly wages edged up to $15.46 from a revised $15.45 in October. Wage growth is crucial for consumer spending, which fuels two-thirds of the economy.

The average work week grew to 33.9 hours from 33.8 in October, indicating businesses increased activity in November.  Top of page

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