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US Job Growth Slower Than Expected - 2004-07-02


After several months of robust gains, job creation unexpectedly slowed in the United States in June. Despite the disappointment, 112,000 new jobs were added during the month just passed.

Financial markets had anticipated 250,000 new jobs to be added in June. Thus they were surprised by job growth of less than half that amount.

Diane Swonk, chief economist at Bank One in Chicago, was among those who guessed wrong about June's employment data.

"But the bottom line is, you know, these recoveries are by no means seamless," she said. "This is a little wrinkle but it is not the end to the underlying recovery in employment."

Ms. Swonk says the weak jobs report gives credence to the Federal Reserve's caution in bringing short-term interest rates up to levels normal during a period of strong economic expansion. This week the Fed raised the overnight fed funds rate only a quarter-percent from its 48-year low of one percent.

The unemployment rate in the United States holds steady at 5.6 percent. Despite the disappointing figures, this was the tenth consecutive month of payroll growth. One and a half million jobs have been created during this period. The Labor Department revised slightly downward the strong jobs data for May and April.

Ms. Swonk in Chicago is very optimistic about the overall performance of the American economy. She anticipates rising growth and continued low inflation and interest rates.

"I think we'll be crossing five percent on gdp growth," she said. "I don't think that is too hard to do. You don't have to push too hard to get there from where we are at. This quarter will be a little bit slack. And it means more catch up later in the year."

Employment in the hard pressed U.S. manufacturing sector fell by 11,000 in June after several months of gains.

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