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'Disastrous' U.S. labour report fuels fear of jobless recovery

Saturday, March 6, 2004 - Page B1

WASHINGTON -- Another month of unexpectedly dismal job creation across the United States has sent shockwaves rippling out from Main Street to Wall Street and the White House.

U.S. employers added just 21,000 jobs to a work force of nearly 140 million in February -- well below the most pessimistic forecasts. The jobless rate was unchanged at 5.6 per cent, as more Americans abandoned their quest for work.

The disappointing report sent the U.S. dollar and bond yields sharply lower yesterday as investors digested a fourth consecutive month of subpar job creation. The Canadian dollar surged two-thirds of a cent (U.S.) to end the day at 75.66 cents, while the euro had its best day in five weeks, rising to $1.2374 from $1.2203 on Thursday.

More broadly, the weak labour market is fuelling fear the mighty U.S. economy is in the throes of a destabilizing jobless recovery.

Companies are producing more, driving their profits higher, but doing it all without adding new workers -- at least not in the United States.

"Businesses seem to be doing everything they can to increase profits without increasing hiring," concluded Bill Cheney, chief economist at John Hancock Financial Services in Boston.

The economy's persistent failure to generate jobs is also becoming a big headache for U.S. President George W. Bush, who is struggling to convince Americans they should re-elect him in November, even though 2.3 million jobs have vanished on his watch. Barring a stunning jobs comeback, he will become the first U.S. President since Herbert Hoover during the Great Depression to preside over a net loss of jobs during a four-year term.

U.S. Treasury Secretary John Snow urged Americans to be patient, insisting that the Bush administration's elixir of tax cuts has produced strong economic growth and that jobs aren't far behind.

"We have turned the corner on growth and I'm confident we'll see strong job numbers in the month ahead," Mr. Snow told reporters.

Democrats could hardly contain their glee. Massachusetts Senator John Kerry, who has all but secured the Democratic presidential nomination, seized on the numbers to attack Mr. Bush's economic stewardship. Mr. Kerry said the best way to put Americans back to work would be to give Mr. Bush a new job. "At this rate, the Bush administration won't create its first job for more than 10 years," Mr. Kerry said.

Economists spent much of yesterday scrambling to outdo each other with expressions of disappointment and surprise over the virtual absence of new jobs. They used words such as "shocking," "dismal," "disastrous," "bleak" and "ugly" to describe the numbers.

The consensus among economists was that the economy would generate 130,000 jobs in February. Instead, there were just 21,000.

Economists, who typically look for a silver lining, were struggling to find something good to say.

"Beneath the headlines, the picture is even bleaker," economist Kathy Bostjancik of Merrill Lynch in New York told clients in a report.

Manufacturers shed 3,000 jobs, extending to 43 consecutive months that the sector has lost jobs. Construction employment fell by 24,000. Without modest gains in temporary and government jobs, the economy would have actually shed jobs in February.

"You go through all the major job categories and there just isn't any job growth anywhere," lamented Joseph LaVorgna, chief fixed-income economist at Deutsche Bank Securities in New York.

He and other economists continue to debate how an economy that seems to be growing rapidly can generate so few jobs. (On an annual basis, the economy grew 8.2 and 4.1 per cent respectively in the third and fourth quarters of last year.)

Many say the answer lies in a remarkable technology-driven surge in productivity, which has made it easier for businesses of all kinds to do more with fewer workers. There has also been a movement of some jobs overseas, though economists differ on the magnitude of the so-called offshoring problem.


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