2004 Job Creation Is Best in Five Years

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U.S. employers added 157,000 workers overall to their payrolls in December, bringing the year-end total of new jobs to 2.2 million, the best showing in five years. The unemployment rate held steady at 5.4 percent.

The Labor Department reported Friday that the 2.2 million new jobs created in 2004 were the most in any year since 1999, when employers added 3.2 million positions, based on a government survey of businesses.

In 2003, there was a net 61,000 reduction in payroll jobs.

President Bush called it "a very positive set of numbers" that are proof the economy is growing. "That's positive news," he said at the end of a meeting with the leaders of a bipartisan panel he's tasked with recommending reforms to the tax code.

But he misstated the actual number, saying in the Oval Office that 159,000 new jobs were added. "I stand corrected — it was 157,000," he said later at a speech in Michigan on asbestos lawsuit reform.

The report didn't sour economists, but it didn't wow them either.

"2004 didn't go out like a lion, but it didn't go out like a lamb," said Ken Mayland, president of ClearView Economics. "It went out like a cow: beefy but docile. These aren't great results, but they're not tepid either. They're kind of in between."

The figures capped a presidential election year in which job creation was a big concern to many voters, and a potential liability to Bush. Job growth had been slow since the 2001 recession, puzzling economists and policy-makers expecting the labor market to bounce back more quickly. Democrats seized on the weak performance, claiming the president's economic policies were not working.

But ultimately, the economy wasn't enough of a concern to deny Bush a second term.

With Friday's report, Bush is close to closing the gap in job creation that has plagued him since taking office in 2001. There are now just 122,000 fewer jobs.

Looking ahead, the Bush administration predicts the economy will create another 2.1 million jobs in 2005 — a figure that private economists say is respectable and beatable. In the game of managing expectations, it's a much lower estimate than a previous administration forecast of 3.6 million new jobs this year.

The Federal Reserve boosted short-term interest rates last month for a fifth time, saying that "labor market conditions continue to improve gradually."

On Wall Street, investors were pleased with the jobs numbers, with stocks rising in morning trading.

In the report, the 157,000 net increase in jobs in December was close to the 175,000 that economists were predicting. It came on top of the 137,000 added the previous month, which was revised 25,000 higher than the government initially reported.

The service sector continued to spark overall hiring in December. But the job growth was concentrated in the health care industry, which added a net 36,000 positions, and business and professional services, which hired a net 41,000 workers.

As the holiday shopping season got in full swing, retailers ended up shedding almost 20,000 jobs overall. Analysts note that the figures are seasonally adjusted and subject to big fluctuations during that time of the year.

"Because of retailers' trepidations about this holiday selling season, they didn't do the usual amount of seasonal hiring," Mayland said.

The good news is the seasonal layoffs that occur in January and February should be moderate this time, he said.

The housing market last year continued to trigger job growth, with the financial service industry adding a net 14,000 jobs last month and 140,000 net jobs for the year as mortgage interest rates remained at low levels. Real estate employment was flat in December, but up 42,000 over the year.

Construction companies continued to hire new workers for the 10th straight month, increasing their payrolls by 13,000.

While government employment didn't change much in December, payrolls rose by 172,000 in 2004. Most of the growth occurred at the state and local levels, especially in education. At the federal level, the U.S. Postal Service continued to shed jobs while employment in the rest of the government didn't change much.

The nation's civilian unemployment rate has hovered at 5.4 percent and 5.5 percent since July, slightly below levels earlier in the year.

Separately, labor force participation is trending down, reflecting "long-term structural and demographic shifts, as well as more short-term business cycle fluctuations," said Kathleen P. Utgoff, commissioner of the Labor Department's Bureau of Labor Statistics.

The participation rate has declined sharply in the past several years among younger workers, with economists speculating that a weak labor market is causing those people to stay in school, including seeking higher degrees. But the number of people age 55 and older working or looking for employment has risen in the past four years.