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Friday, 4 October, 2002, 12:59 GMT 13:59 UK
US jobs paint slow-growth picture
US unemployment graph
After rising sharply, joblessness in the US has flattened

Every month Wall Street waits with bated breath the release of the monthly US jobs report.

We already have a much worse recession than it appears...

Jeff Madrick, author
"Why Economies Grow"
No other indicator of the economy is so widely anticipated or paid so much attention.

The report, issued the first Friday of each month, is considered the single best measure of the health of the economy and generally sets the tone for other economic releases that follow it.

The report contains not only the closely watched unemployment rate but also information about job and wage growth.

It is the lack of expansion in employment and earnings, some analysts argue, that should alarm the Republican Bush administration and set his team of conservative economic advisers into crisis mode.

Lack of leadership

"The guys are sitting there while Rome burns, telling us things are great!" says Jeff Madrick, author of the book "Why Economies Grow," and a contributor to the New York Times.

US President George W Bush
Mr Bush has largely kept his hands off the economy

"We already have a much worse recession than it appears when you measure it in terms of how many people are leaving the work force," he says, referring to the proportion of people who have jobs compared to the working-age population.

Uncertainties over the conflict with Iraq, rising oil prices and corporate scandals also weigh on the economy.

"It's all the more reason you need economic leadership," Mr Madrick told BBC News Online. "And George Bush is providing no economic leadership."

'Jobless' recovery

Others are not quite so quick to criticise the US president's team.

The swing in the unemployment rate... is as big as we've seen in any other recession

Ram Bhagavatula

"I don't know what the administration could do at the moment," says former Federal Reserve governor Lyle Gramley.

The weakness among job growth has more to do with "phenomenal increases" in productivity than any single economic factor, he says.

Economists use four major indexes to gauge whether an economy is in recession, including personal income, industrial production, retail sales and job growth.

While the first three areas have moved upward, employment has not.

For that reason critics have called the current economic recovery that got underway late last year a "jobless" recovery.

Potent recession

While job growth has been at a standstill, unemployment has not, rising and falling incrementally over the last six months, after steady increases last year.

Federal Reserve Chairman Alan Greenspan
Mr Greenspan has warned of too much spending
But what interests some economists is not so much the month-to-month changes as the total change within an economic cycle.

"If you look at the swing in the unemployment rate from the low to the high so far, [it] is as big as we've seen in any other recession," says Ram Bhagavatula, chief economist at the Royal Bank of Scotland.

Such data would indicate that last year's recession was at least as potent as any the US has gone through in the last 55 years.

The low point in the unemployment rate during the current economic cycle was 3.9%, which last occurred in October 2000, and has risen as high as 6%.

On Friday, the Labor Department reported US unemployment fell slightly to 5.6% in September.

But even as the number of jobless fell last month, 47,000 fewer jobs were created, the worst showing since February, giving further evidence of weak job growth.

Excess capacity

In addition to lacklustre employment statistics, other data show this recovery, unlike others in the post-World War II period, appears anaemic.

It's difficult to say what might be the perfect policy prescription

John Puchalla
For example, the US economy grew by an average 6% annual rate in the first year following previous recessions.

This year, however, the economy is set to grow by just half that.

The data suggest the US is still in a recovery, Mr Gramley says, "although a moderate and rather erratic one".

Most experts agree it is difficult to pinpoint exactly what is ailing the US economy.

The massive spending on technology upgrades in the late '90s still lingers like a bad hangover, as does the debt generated to finance it.

"Until excess capacity is worked off and until corporate debt declines somewhat, it's hard to see how we'll get a real strong recovery in capital spending that would really provide a boost to employment and diminish the risk to consumer spending," says John Puchalla, an economist at Moody's Investor Service.

Action needed

What is clear to most is that there is very little direction coming from politicians in Washington.

Even socially liberal Democrats have been timid about proposing programmes to stimulate the economy.

Fearful of being painted big spenders, they instead offer minor initiatives such as an extension of unemployment benefits or boosts to the minimum wage.

A dearth of bold initiatives from Washington may further erode already slipping consumer confidence.

"[But] it's difficult to say what might be the perfect policy prescription," says Moody's Puchalla.

A resolution to the conflict in Iraq would help. But until Congress or the president act, the US economy is likely to limp along.

And weak jobs data are likely to keep Americans from spending.

"If the consumer's doing poorly," says Royal Bank of Scotland's Bhagavatula, "it's very difficult to see how the rest of the economy can do well."

Economic indicators

Fears and hopes

US Fed decisons

See also:

02 Oct 02 | Americas
03 Oct 02 | Americas
27 Sep 02 | Business
29 Sep 02 | Business
25 Sep 02 | Business
12 Sep 02 | Business
21 Aug 01 | Business
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