A new report by the U.S. Labor Department has stunned many economic forecasters. It says the fast-growing U.S. economy created only 1,000 new jobs in December. This is far less than the 130,000 that had been expected.
Jim Smith, a forecaster at the business school at the University of North Carolina, calls the December job report by the Labor Depratment amazingly puzzling. He had expected job growth of up to 200,000. He, like economists advising President Bush, expects about two million new jobs to be created before the November presidential election.
"One thousand is clearly a lousy start," he said. "The only thing I can say is it is puzzling. Because it is completely out of character, out of line, really, with all of the other data that are coming in. I mean we had an all-time record Christmas shopping season. And yet retailers shed workers."
Mr. Smith speculates that companies may be investing in labor saving computer technology that is boosting productivity and eliminating the need to hire more workers. Mr. Smith expects the U.S. economy will expand by at least five percent this year, which would be its best performance in many years.
Mike Donnelly, a forecaster for DRI Global Insights in Philadelphia, says the weak job report is likely to delay any central bank move to raise short-term interest rates, which are currently at their lowest level in 40 years.
"We've got our official forecast saying the first rate increase comes in May 2004," he said. "But with this report coming out maybe that gets delayed until June. But that would be about it."
Other economists expect interest rates to remain unchanged for all of 2004.
The Labor Department report contained other disappointing news on the employment front, even though the unemployment rate is now at a one-year low of 5.7 percent. The report says nearly a half million unemployed workers were so discouraged by the lack of job prospects that they dropped out of the work force. That explains why the nation's unemployment rate declined by two tenths of one percent even though there was hardly any job growth.
Despite the slow job growth in December and downward revisions for November economists generally are boosting their forecasts for U.S. and world growth for 2004 and 2005.