- The Washington Times - Friday, June 4, 2004

The economic expansion broadened and strengthened last month with the addition of nearly a quarter-million jobs from manufacturing to finance, the Labor Department reported yesterday.

Growth in the job market was so robust this spring that it drew out an equal number of new job hunters with revived hopes of finding work in May, leaving the unemployment rate at 5.6 percent.

Businesses brimming with profits and renewed confidence have added 1.4 million jobs since August — most of that in the past three months, when job gains averaged more than 300,000 a month.

If the string of sizable job gains continues, all of the 2.7 million jobs lost since the 2001 recession could be recouped by the fall elections, analysts said.

For President Bush, the news was reason to celebrate.

“Today’s employment report shows that the American economy is strong and getting stronger,” Mr. Bush said while visiting Rome. “The economy is vital and growing. … The policies that are in place are working. The entrepreneurial spirit is strong. The small-business sector of the economy is vibrant.”

Wall Street markets also applauded the job breakthrough, although their rejoicing was tempered by the sharply higher interest rates brought on by stronger growth.

Economists said the report left no doubt that the acceleration of growth this spring jump-started a new stage in the expansion, in which the creation of jobs generates the growth in incomes and consumer spending needed to keep the recovery on track without further help from the Federal Reserve or Congress.

The snapback in the job market after three years of deep job losses means that the central bank no longer needs to keep interest rates at their lowest levels in a generation to continue nurturing the economy back to health.

Fed-watchers expect the central bank’s rate-setting committee to announce a rate increase as large as a half percentage point at a meeting scheduled for the end of the month.

The Fed’s goal would be to increase rates fairly quickly to levels where they no longer are stimulating the economy nor curbing growth, the analysts say.

The rates on 30-year mortgages already have climbed a percentage point since March as financial markets braced for the Fed’s first rate increase in four years.

“Circumstances have changed, and policy will respond,” said Fed board member Donald Kohn, who hailed the jobs report as “very good news” in a speech to the National Economic Club yesterday.

Bill Cheney, chief economist with MFC Global Investment Management, said a “measured,” quarter-point rate increase by the Fed is “pretty much guaranteed” at the end of the month.

The central bank will not move too precipitously, he said, because the job market remains slack, with more than 8 million people still looking for work.

Just as manufacturing led the economy into recession with big job losses in 2001, this year’s job revival is being fed by a robust comeback in manufacturing. The once-battered, but now booming, sector last month scored its biggest job gain — 32,000 — since 1998.

“Hip-hip hooray,” said Jerry Jasinowski, president of the National Association of Manufacturers, noting that the job surge this spring was the logical result of the economy’s sharp acceleration in the second half of last year.

“Employment is always a lagging indicator, but it lags no more,” he said.

With the across-the-board revival of jobs — only the federal government shed jobs last month — the economy is on track to create as many as 3 million jobs this year, easily erasing the job deficit that has haunted Mr. Bush since he took office, economists said.

Although some people laughed last winter when the Council of Economic Advisers predicted an increase of 2.6 million jobs this year, the White House forecast “is looking better and better each month,” said Richard Yamarone, economist with Argus Research Corp.

Job growth could fall to a more subdued 200,000 a month and still reach that target, he noted. Many private economists who predicted a return of job growth this year also have been vindicated.

Mr. Yamarone does not expect the recent “voracious” growth of jobs to continue. He noted that a few clouds still hang over the economy and are causing hesitation among employers — particularly the chiefs of large corporations that compete in the global economy.

“There are several hurdles that businesses face over the summer — rising energy prices, potential domestic and global terrorist threats, and elevated medical and benefit costs,” Mr. Yamarone said. “We suspect the future might not be as rosy.”

House Democratic Whip Steny H. Hoyer of Maryland said May’s job gains were “good news for workers.”

But he added, “Let’s remember that during the Clinton administration, the economy averaged 239,000 jobs gained every single month for eight straight years. … There really is no comparison.”

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