South-Western College Publishing - Economics  
U.S. Job Growth Slows
Subject Job Creation
Topic Employment, Unemployment, and Inflation
Key Words

Employment and Job Creation

News Story

A Labor Department report from early July indicated that only 112,000 new jobs were created in June. This number was much lower than the 250,000 new jobs that Wall Street analysts had predicted. Additionally, April and May new-job totals were revised downward, to 324,000 and 235,000 respectively, from 346,000 and 248,000. The job report came as a shock to many, but analysts are withholding judgment about the long-term effects of the less robust job growth.

"It was pretty much a weak report, a disappointing report across the board," said economist Henry Willmore of Barclay's Capital in New York. "But I don't think it changes the fundamental picture, we would have to see a bit more evidence before it would start to look like the economy is slowing down."

Although the jobs created are fewer than expected, June still represents the 10th straight month during which the number of jobs grew. Over those ten months, about 1.5 million workers joined company payrolls. Politically however, the unexpectedly steep slowdown may make it harder for President Bush to campaign for re-election in November based on a claim of improving economic conditions.

The timing of this report was striking in relation to the recent hike in interest rates by the Federal Reserve, a move intended to slow a robust economy. The new data suggests that the Fed may not have had to move as aggressively as some analysts had thought to quell inflationary pressures.

"This pace of job creation shows there is still slack in the labor markets. The bottom line is that this is the type of number that will allow the Fed to continue its tightening at a measured pace," said Alex Beuzelin, a foreign exchange market analyst with Ruesch International in Washington.


(Updated August, 2004)

Questions
1.

With employment still growing in June, how important do you think it is that not as many jobs materialized as some analysts had predicted?

2. Discuss the relationship between job creation and economic recovery.
3. Why are Wall Street analysts' opinions or expectations about such broad economic phenomena important? Why are analysts' expectations cited more often than are the opinions of professors or government officials?.
Source Reuters, "After Months of Gains, U.S. Job Growth Slows Sharply in June", The New York Times Online, July 2, 2004.

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