Semi-Daily Journal Archive

The Blogspot archive of the weblog of J. Bradford DeLong, Professor of Economics and Chair of the PEIS major at U.C. Berkeley, a Research Associate of the National Bureau of Economic Research, and former Deputy Assistant Secretary of the U.S. Treasury.

Saturday, January 07, 2006

The end-of-the-day AP story about the January 6, 2006 BLS Employment Report:

U.S. Job Growth Slows a Bit in December as 108,000 Are Created - New York Times: By THE ASSOCIATED PRESS Filed at 5:46 p.m. ET: WASHINGTON (AP) -- Businesses boosted payrolls modestly in December, and the unemployment rate dropped to 4.9 percent -- evidence, President Bush said, of the economy's resiliency in the face of last year's hurricanes and high energy costs. For all of 2005, employers added 2 million new jobs.

The employment report released by the Labor Department on Friday suggested that the job market headed into the new year in pretty good shape, analysts said. On Wall Street, the Dow Jones industrials closed up 77.16 points.

December's jobless rate was down from November's 5 percent rate. Payrolls grew by 108,000 last month -- a figure that was restrained by job losses in construction, which were blamed on bad weather in some parts of the country, as well as job cuts in retailing.

Employers, however, ended up adding 71,000 more jobs in October and November combined than previously reported. That took the sting out of December's figure, which was about half of what had been expected.

In 2005, the economy added 2 million jobs -- an amount that economists described as solid -- and in line with the 2.2 million jobs created the year before. The economy lost jobs in 2001 and 2002 but saw a small gain in 2003. The unemployment rate averaged 5.1 percent last year, an improvement from the 5.5 percent average registered in 2004.

''We have a sturdy job market,'' said Mark Zandi, chief economist at Moody's Economy.com. He expects another 2 million jobs will be created this year and the average unemployment rate for all of 2006 will drop to 4.9 percent.

Bush, whose standing with the public has improved but still remains relatively low, has shifted into a campaign-like mode to shine a spotlight on the economy's good points in speeches around the country, including an appearance in Chicago on Friday. His economics team also fanned out to talk about the economy.

''The American economy heads into 2006 with a full head of steam,'' Bush declared.

''We've been through a lot,'' he said, referring to the 2001 recession, terror attacks, corporate accounting scandals, high energy prices and the Gulf Coast hurricanes that have punctuated the economic landscape over the last five years. Bush credited his tax cuts with helping the economy and called on Congress to make them permanent.

Democrats contend that the tax cuts mostly helped the wealthy and thrust the nation's balance sheets into red ink. The middle class, they say, is getting squeezed by high health care and energy costs.

''The Bush administration's call for another round of tax cuts for the wealthy few when middle-class families are struggling to pay their bills is another example of misplaced Republican priorities,'' said House Democratic Leader Nancy Pelosi of California.

In other economics news, consumer confidence sank in early January. The RBC CASH Index, based on polling by Ipsos, showed that consumer confidence dropped to 78.2 this month from 85.5 in December. The decline mostly reflected Americans' anxiety over the economy's prospects and their own financial positions in the coming months. But they also felt less confident about the jobs climate.

On the jobs front, employees' average hourly earnings climbed to $16.34 in December, up 0.3 percent from November -- slightly more than economists anticipated.

Compared with a year ago, hourly earnings were up 3.1 percent. ''Wages weren't keeping pace with inflation last year,'' which is estimated to be around 3.8 percent, said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group. So workers are feeling pinched, analysts said.

To keep inflation in check, the Federal Reserve is expected to boost short-term rates at its next meeting on Jan. 31. That will mark the last session for chairman Alan Greenspan, who will retire that day after 18-plus years at the helm.

Another rate increase could come at the following meeting on March 28 -- the first one to be presided over by incoming Fed chief Ben Bernanke. Either way, many economists believe the Fed's nearly two-year credit-tightening campaign will be winding down this year.

The employment report also showed that the average time the unemployed spent searching for work in December was 17.3 weeks, an improvement from the 17.6 weeks in November.

Most private economists predict the economy will grow respectably this year -- topping 3 percent. Friday's jobs report ''suggests decent but not stellar economic growth,'' said Nigel Gault, economist at Global Insight.

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