- The Washington Times - Saturday, March 9, 2002

The nation's unemployment rate declined to 5.5 percent last month as businesses hired 66,000 new workers, the first substantial job growth since the recession began a year ago.
The news from the Labor Department yesterday raised hopes that the economy will avoid a "jobless recovery" like the one that dragged on after the 1990-91 recession, when unemployment kept rising even though the economy had started growing again.
During this recession, the unemployment rate appears to have peaked early in December at 5.8 percent a rate so low that only a decade ago it would have been considered "full employment." The peaks during the previous two recessions were 7.8 percent and 10.8 percent.
Federal Reserve Chairman Alan Greenspan may have been aware of the jobs report when he declared on Thursday that a recovery is "well under way," Fed watchers said. For the central bank, the return of job growth represents a turning point for the economy.
For President Bush, already basking in signs of a recovery from what could be the mildest recession in U.S. history, the report of declining unemployment was "good news."
But the president, speaking at a semiconductor plant in Florida, said he was wary of the political stigma that can accompany any period of "jobless recovery," which some economists have been forecasting.
"As far as I'm concerned, the economy is not strong enough when people are looking for work and can't find it. I'm going to keep focused on jobs. I'm not going to let the numbers lull me to sleep."
After six months of partisan wrangling, Mr. Bush and Congress yesterday finally reached agreement on a $51 billion economic-stimulus plan that includes a 13-week extension of unemployment benefits and investment tax breaks for businesses.
Economists said the investment tax breaks improve the chances that the budding recovery will be sustained through the year with a return to health of the economy's most critically ailing sector: business investment and profits.
"Slimmed down though it may be, the stimulus is a potent one," said David A. Levy of the Jerome Levy Economic Institute. "From the profits perspective, it will make a significant difference at a time when momentum would most likely otherwise have started to fade."
The estimated $43 billion reduction in corporate income taxes that the bill provides this year will put "extra cash in corporate hands at a time many companies are strapped," he said, and might otherwise resort to layoffs to boost profitability.
Even as the government reported the first job growth since a small increase of 18,000 jobs in July, the bankrupt Kmart Corp. announced that it would eliminate 22,000 jobs this year, and the bankrupt Global Crossing Ltd. said it would shed 2,400 high-tech jobs.
Against that backdrop, economists said the employment performance in February was hardly a blockbuster one and might be short-lived. But after nearly a year of job losses at a rate of about 150,000 a month, even a small increase is a sign of hope.
The Boston committee that officially determines the starting and ending points of the recession has accorded special consideration to monthly job figures. It dated the start of the 2001 recession last March because that was when the economy began to consistently lose jobs each month.
The Labor Department cautioned against over-optimism about the 66,000 new jobs last month, noting that several "special factors" boosted the figure, including unusually warm weather that spurred an increase of 25,000 construction jobs.
It also attributed an increase of 58,000 jobs in retail employment, after seasonal adjustment, to an unusual hiring pattern, with retailers hiring fewer extra workers at Christmas and thus laying off fewer workers this year.
The February job increase followed a revised loss of 126,000 jobs in January, nearly 40,000 more than the department previously reported. Also, economists pointed out, the hard-hit manufacturing sector continued to shed jobs, though its loss of 50,000 jobs last month was only half the previous rate.
"Much of the good news on jobs occurred due to temporary factors," said Sung Won Sohn, chief economist of Wells Fargo & Co. But he said the report still shows "recovery is under way" and he expects the economy to keep delivering pleasant surprises as the expansion picks up steam.
Dean Baker, co-director of the Center for Economic and Policy Research, noted that the increase of 26,000 jobs in state and local government last month is unlikely to be repeated since those governments are facing big budget shortfalls made worse by the tax cuts in the stimulus bill. New York and Florida already have announced work force reductions of 5,000 and 3,000, respectively.
The National Governors' Association said the tax cuts will further erode states' revenue base by $14.7 billion in the next three years, forcing states to cut deeper into their budgets for health care and education. Those areas previously were among the strongest hiring in the economy, even during the recession.
"The state and local budget cuts have yet to be felt," Mr. Baker said. "The report shows some improvement in the labor market from the second half of 2001, but it is too soon to assume that a solid recovery is in the works."


Copyright © 2018 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.

 

Click to Read More and View Comments

Click to Hide