Unemployment Highs & Job Creation Lows
Friday, January 04, 2008SUSIE GHARIB: A big jump in the nation's unemployment rate led to a big drop on Wall Street today. The Dow tumbled 256 points and the NASDAQ plunged 98. The unemployment rate rose from 4.7 to 5 percent in December, its highest level in two years. U.S. payrolls grew by just 18,000 jobs, the slowest pace since 2003. Meanwhile, President Bush and his White House economic team are considering a possible stimulus package. We have two reports this evening looking at the outlook for the job market and how Washington lawmakers are responding. We begin with Suzanne Pratt in New York.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: The labor market was supposed to be the one area of the economy that was holding up. The theory: job and wage growth would help Americans weather stresses in the housing sector and keep them spending money. Economists say the December employment report muddies that wishful thinking and raises new concerns about a recession. The nation's unemployment rate has surged 0.6 of 1 percent in the last year. And Bear Stearns economist John Ryding finds that cumulative gain the most alarming part of today's data.
JOHN RYDING, CHIEF U.S. ECONOMIST, BEAR STEARNS: Since 1950, every time the unemployment rate has risen as much as it has risen over the last 12 months, the economy has been already in recession at that point. So it's a troubling signal.
PRATT: Manufacturing industries, construction firms and retailers slashed jobs last month. But for the second straight month, the service sector experienced big job gains, particularly professional and technical services. Tig Gilliam, CEO of Adecco North America, a leading staffing and job placement firm, says the data is consistent with what he's been seeing.
TIG GILLIAM, CEO, ADECCO NORTH AMERICA: If you are looking for a job and you are in construction, you've got 9.5 percent unemployment. If you're in manufacturing in Detroit you've got 7.2 percent unemployment. If you're in IT in Washington DC, you have less than 2 percent unemployment and you're going to have probably a pretty good experience in the job market today.
PRATT: The December employment report underscores the growing dilemma for the Federal Reserve. Should Fed policymakers be fighting inflation or recession? JPMorgan economist Bruce Kasman says right now the recession risk is most important and that's why he feels the Fed will aggressively cut rates at the end of the month.
BRUCE KASMAN, CHIEF ECONOMIST, JP MORGAN: We think they are going to be easing 50 basis points at the January FOMC meeting. But they are also going to do so with the idea that if the economy does perform OK during the first half of the year, begins to improve, that they can take that back relatively quickly.
PRATT: Experts say it's still unclear whether the U.S. economy is headed for recession. But, most agree today's bleak employment report certainly raises the probability of one in 2008. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: This is Stephanie Dhue in Washington. With economists now talking about a recession, the policy talk is now focusing on an economic stimulus package. After meeting with his working group on financial markets, headed by Treasury Secretary Paulson and including Fed Chairman Ben Bernanke, President Bush declared the economy fundamentally strong, despite anemic job growth.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: This economy of ours
is on a solid foundation, but we can't take economic growth for granted. And there are signs that will cause us to be ever more diligent and to make sure that good policies come out of Washington.
DHUE: He suggested Congress make his tax cuts permanent.
BUSH: If the foundation is strong, yet indicators are mixed, the worst thing the Congress could do is raise taxes on the American people and on American businesses.
DHUE: Chamber of Commerce economist Martin Regalia agrees with that tax policy and says a stimulus plan should be broad based.
MARTIN REGALIA, CHIEF ECONOMIST, U.S. CHAMBER OF COMMERCE: The type of fiscal policy we're looking to are policies that that would look to broadly affect the economy, rather than increase government spending in particular sectors.
DHUE: But many Democrats are pushing for a more targeted approach. David Madland of the Center for American Progress thinks cutting the earned income tax credit for low wage workers and boosting spending on renewable energy are the ways to go.
DAVID MADLAND, DIR., WORK/LIFE PROGRAM, CENTER FOR AMERICAN PROGRESS: We think one of the good things that a stimulus package could do would be to look at ways to create new green jobs, part of addressing climate change.
DHUE: Analysts say any fiscal stimulus package will need bi-partisan support to pass. In an election year, that may be a tall order. And some doubt it will actually boost the economy, since by the time any new spending or tax cuts make their way through the political process, the economy will have moved on. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
