Jobs growth disappoints Economy created just 112,000 jobs in June, less than half of forecasts; unemployment flat at 5.6%. July 2, 2004: 11:22 AM EDT By Chris Isidore, CNN/Money senior writer NEW YORK (CNN/Money) - Job growth slowed dramatically in June, as employers added just 112,000 workers to payrolls last month, a number that came in well below forecasts by private economists. The gain was about half of May's revised gain of 235,000 jobs, and was the weakest since February following three straight months of strong job growth, the Labor Department reported. Economists surveyed by Briefing.com had forecast a gain of 250,000 jobs in the month. Those surveyed by Reuters had a range of estimates from 185,000 jobs forecast by Wells Fargo Bank to 310,000 forecast by Thompson Financial. The unemployment rate was 5.6 percent, unchanged from the May reading of 5.6 percent and in line with economists' forecasts. Aside from the sharp slowdown in job growth, the report contained more bad news for workers. Average hourly wages rose 2 cents, or 0.1 percent, to a seasonally-adjusted $15.65. But that was well below the 0.3 percent gain that economists had forecast. In addition, the average work week fell to 33.6 hours for private sector employers last month from 33.8 in May. "This economic recovery is a lot more fragile than most of us thought," said Anthony Chan, chief economist for Banc One Investment Advisors. Part of the problem was a drop in manufacturing jobs after the sector had finally pulled out of a 42-month slump and posted four straight months of jobs gains. But last month the sector lost 11,000 jobs. The construction industry posted no job gains and the retail sector added a modest 7,000 jobs, by far the weakest month for an industry that's added 184,000 jobs so far this year. The services sector -- the biggest component of the world's largest economy -- added 122,000 workers but that was the second-weakest gain of the year. Most economists said that despite the weak report, they expect solid growth to resume soon and continue throughout this year. "Jobs gains were clearly below expectations and trend," said John Silvia, chief economist at Wachovia Securities. "There may be some bounce back next month in specific sectors. Slower job gains may also reflect the impact of higher oil prices and uncertainty in the spring." "While this raises a red flag, no one should be in panic mode just yet," said Drew Matus, economist with Lehman Brothers. But some analysts said job growth probably won't be as strong as it was in the spring, when the economy created 300,000 jobs a month on average in March, April and May. "The economy is clearly cooling or downshifting somewhat," said Sung Won Sohn, chief economist at Wells Fargo Banks, adding that it wasn't "necessarily ... getting into deep trouble." He said job growth should still average "a couple hundred thousand" jobs a month for the rest of the year, on average. On Wall Street, stock prices fell modestly after the report. But Treasury bond prices soared and yields, which move in the opposite direction, fell sharply after the jobs report. That's because some investors were betting that a weaker-than-expected economy may slow the Federal Reserve from hiking interest rates aggressively. The Fed, the nation's central bank, raised its benchmark rate a quarter-point Wednesday, the first increase in four years. "The stock market didn't want the economy to grow too quickly because they were worried about aggressive rate hikes," said Chan. "They wanted the Goldilocks approach where everything was just right. But now they realize that maybe the porridge is a bit too cold for their taste." "I don't think the recovery is in danger," said Banc One's Chan. "But I think what we have here is a situation where the Federal Reserve will probably look at the numbers a lot more closely. If we see another 2 or 3 economic statistics that surprise us, yes the Fed can pause and not raise rates in August." Bad news for Bush? The weak report can't be good news for President Bush and his re-election effort, said Greg Valliere, political economist for Schwab Washington Research. It means the administration will have to go through the late summer and the fall presidential campaign with challenger John Kerry saying this is the first administration since Herbert Hoover to have more job losses than gains. "I think that they were hoping to totally remove that trump card, and it looks like they might not be able to," he said. But Valliere said he thinks one weak jobs report isn't enough to cause Bush supporters to panic, that the trend in employment is more important than any one report. "I think if we got a second successive weak number in early July, then I would really worry if I was in the White House," he said. "We only see three more reports before the election." Treasury Secretary John Snow said that he's not concerned about the jobs report. He told CNNfn's Market Call that the household survey, which picks up gains from self-employment that the employer survey often does not show, showed a gain of 259,000 jobs in the month. "This is a strong recovery," he said. "It's a recovery that will continue to see growth and expansion and lots and lots of jobs created in the months ahead." http://money.cnn.com/2004/07/02/news/economy/jobless_june/index.htm
