- The Washington Times - Friday, July 2, 2004

Job growth slowed sharply to 112,000 last month, the latest sign that the economy’s spring surge in momentum is sputtering under the weight of higher interest rates and gasoline prices.

The slowdown in job growth from more than 300,000 in the previous three months was the result of reduced sales and hiring at retailers and the leisure industry, and renewed layoffs in manufacturing, the Labor Department reported. Unemployment remained at 5.6 percent nationwide.

Gas prices, which hit record highs early in the month, took a toll on auto sales, which fell to a 12.1 million annual rate from 14.2 million in May, prompting automakers in the Midwest to slash production and jobs.

Sales of sport utility vehicles and light trucks, which consume the most gasoline, crumpled to 7.1 million from 8.7 million, as automakers lifted deep discounts and incentives offered the previous month, while sales of more fuel-efficient Japanese models gained ground.

“The recovery has hit a soft spot,” said John Silvia, chief economist with Wachovia Securities, attributing some of the weakness in June to unusually cool and rainy weather in parts of the country, keeping consumers away from shopping malls.

Wal-Mart and Target, two of the biggest retailers, said their June sales were disappointing. “With more money going to fill gasoline tanks, consumers have less income to spend on other items,” Mr. Silvia said.

The slowdown in June lowered growth during the second quarter to about 3.5 percent from 3.9 percent in the first quarter, he estimates.

Economists said the June lull poses no threat to the recovery, but it may signal a downshift in growth from the vibrant performance since last summer.

Many said the slowdown is welcome, since it should keep the Federal Reserve on guard against lingering weakness in the economy and prevent it from raising interest rates too sharply in the months ahead.

President Bush yesterday hailed the still-solid growth in aWhite House ceremony highlighting the role small businesses have played in creating jobs this year.

“We’re witnessing steady growth,” he said. “And that’s important. We don’t need boom- or bust-type growth. We want just steady, consistent growth so that our fellow citizens will be able to find a job.”

Bush opponents said the slowdown represents a substantial setback for workers, who had been making strides with increasing jobs and incomes earlier in the year.

The average workweek was down at factories and offices to 33.6 hours from 33.8 the previous month, while hourly earnings stagnated, the Labor Department said.

With inflation increasing substantially this year, economists note that dwindling wage growth leaves consumers with less spending power.

“Ninety percent of the jobs that have been created since August 2003 pay below the national average hourly wage,” said House Minority Whip Steny H. Hoyer, Maryland Democrat.

“The administration needs to focus on creating many good-paying jobs, not just celebrate the creation of too few low-paying jobs.”

Michael Alter, president of SurePayroll, a company that provides payroll services to small businesses, said that although hiring is up, salaries generally are down among his clients.

A survey by the Conference Board research firm last month found that employers do not plan to increase spending on salaries this year over last year, keeping average increases to an 11-year low of 3.5 percent in 2004.

The areas where job growth remained healthy last month, according to the Labor Department, were health care, education, and professional and business services, including temporary-help agencies.

Jason Dring of the National Employment Law Project said that a disproportionate share of the 1.5 million jobs created since August have been temporary.

That signals a return to a trend that began in the 1990s, when employers used temporary employment to avoid paying benefits such as health insurance, paid leave and pensions, he said.

“While helping companies maintain labor flexibility, temporary help jobs deprive workers of job security,” he said.

Tim Kane, economist with the Heritage Foundation, said many workers are seeking flexibility just like employers, noting a surge in the number of workers who prefer part-time jobs to 19.5 million in recent years. These people are finding more opportunities today, he said.

“It is an error to assume that temporary jobs are subpar,” he said.

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