The US economy created a paltry 21,000 new jobs last month, casting a cloud over the emerging economic recovery and jolting President George Bush as he embarks on his re-election battle with his Democratic opponent John Kerry.
The figures released by the Labor Department yesterday bear out the White House's worst fears of the so-called "jobless recovery" - that despite GDP growth currently running at 4 per cent or more, the benefits will be lost on voters above all worried about hanging on to their jobs.
The net gain in February was far below the 125,000 forecast by economists, not to mention the 150,000-odd jobs required simply to keep up with the growth in the country's labour force. The headline unemployment rate stayed unchanged at 5.6 per cent, but only because many discouraged applicants simply gave up looking for work. In all, 392,000 people left the labour force between January and February.
In total, some 8.2 million people were unemployed in February, and the average wait to find a new job increased last month to more than 20 weeks, the longest in more than 20 years.
The figures, which include downward revisions for both December and January, mean that over the past three months, the economy has added an average 42,000 jobs a month. Not only is this well down from the 79,000 average over the previous quarter, it also makes a mockery of the latest White House economic report, which rashly predicted the economy would create 2.6 million new jobs in 2004. The first two months have yielded just 118,000.
"The number is not satisfactory," John Snow, the Treasury Secretary, said last night. But he insisted that as the recovery progressed, the missing jobs would return - echoing the confidence of Alan Greenspan, the Federal Reserve chairman, that employment "could get a pop" at any time.
But the private analysts were much bleaker in their assessment. "This is a terribly disappointing report," Joel Naroff, the head of Naroff Economic Advisors of Philadelphia, said. "The economy clearly needs to see better job growth to support consumer spending." Were consumer spending, which accounts for 70 per cent of GDP, to falter, economists warn the overall consequences for the economy could be severe.
The one bright spot for consumers is that the Federal Reserve will now almost certainly leave its benchmark rates at their current near 45-year lows, when the policy making Federal Open Market Committee next meets on 16 March.
Indeed, the diminished threat of higher borrowing costs, a rise in bond prices and a sharp dip in the dollar yesterday combined to help Wall Street recoup early losses after the jobless news. The Dow plunged by 60 points shortly after the opening bell but ended the day up 7.5 points at 10.595.5.
The desperately slow recovery in the labour market reflects two main trends: surging domestic productivity over the past two years, and the haemorrhaging (politely referred to as "outsourcing") of US manufacturing jobs to low-wage economies in Asia and Central America. In February alone, a net 3,000 manufacturing jobs disappeared - the 43th consecutive month in which the sector has contracted.
The political implications for Mr Bush are disturbing. The job losses have been especially acutely felt in traditional industrial states such as Michigan, Pennsylvania, Missouri and Ohio - the last two of which were narrowly carried by the President in 2000, and which could decide the election's outcome this year.
On the Democratic primary trail, Mr Kerry and his vanquished rival Senator John Edwards of North Carolina savaged Mr Bush for pampering the wealthy with tax cuts while paying no attention to ordinary workers. The criticism has driven Mr Bush's approval ratings to below the danger mark of 50 per cent, and turned the economy into his re-election Achilles heel.
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