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112,000 Jobs Added, Most In Three Years But Below Forecast The U.S. economy added 112,000 jobs in January, the most in over three years but well below estimates. Friday's much-anticipated report did little to clear up the murkiness surrounding the job market's health. The jobless rate dipped 0.1 percentage point to 5.6% last month, the lowest in two years, the Labor Department said. Economists had expected nonfarm payrolls to rise by 175,000, with a few forecasting gains of as much as 300,000. The Labor Department also revised its figures for November and December upward, adding a net 55,000. Despite manufacturing surveys showing strong growth and even some hiring, Friday's report indicated factories cut 11,000 jobs in January. That was the 42nd straight monthly decline. Overall, goods-producing firms added 7,000 positions in January, thanks to a 24,000 increase in construction jobs. The services sector hired 105,000 in January. But the bulk of that stemmed from seasonal adjustments in retail, which added 76,000 to their ranks. Meanwhile, businesses eliminated 21,000 temporary positions, the first drop since March. Governments cut 13,000 jobs, the fourth decline in five months. The average workweek rose 0.2 hour to 33.7 hours. The factory workweek rose 0.3 hour to 40.9 hours, the best since November 2000. That's a sign plants may have to add staff to meet demand.
Hourly earnings edged up 0.1% from December and just 2% vs. a year earlier, near a 17-year low. Rich Yamarone, chief economist with Argus Group, called January's payroll gains "poor." He noted that while the 112,000 jobs figure was the most since late 2000, payrolls grew by just 62,000 a month on average in the fourth quarter. And while some hoped to see greater job gains at this point in the recovery, Yamarone doesn't see hiring heating up soon. "People keep thinking it's going to get better. Why would you?" Yamarone said. "I listened to more than a 100 quarterly conference calls (in the third quarter), and no one has said they are ready to flip the switch of new hiring." The manufacturing sector has had a particularly rough time. "It's a structural change in the economy," Yamarone said. "We're moving away from the manufacturing jobs. We have 82% of the people in this country who are employed in the service sector, and it's probably going to be 86% to 87% in the not-too-distant future. Unfortunately, there are positions being eliminated." A sluggish job market shouldn't crimp the overall recovery, he says. Consumers are "still spending, businesses are still investing, and the economy is chugging along at what I anticipate to be a 4% pace throughout '04," Yamarone said. John Norris, senior portfolio manager and economist with Morgan Asset Management, also didn't find the drop in manufacturing jobs surprising, particularly in light of technological advances that allow factories to do more with fewer workers. "That's just going to continue to happen," Norris said. "I don't see any way manufacturing (hiring) is going to pick up significantly." While factory job losses have been heavy the past three years, manufacturing employment peaked in 1998 - in the middle of the U.S.' longest economic expansion and decades-low overall unemployment rate. Norris notes the U.S. is far more dependent on foreign investment now. "In the late 1990s, foreign investors plowed their dollars back into the American economy (by) buying hard assets like businesses and real estate or building new assets," Norris said. That helped create jobs. But today, foreign investors are plowing money into Treasuries and other debt, rather than using it to expand businesses. "Now they are happy to buy our promise to pay them back," Norris said.
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