Economists Are Surprised By Meager Payroll Growth
Prior to Friday's employment report, economists had been under the impression that the labor market was improving, albeit slowly. But when December payroll growth came in 149,000 jobs short of what they'd expected (see article1), many were caught off guard. Here's what economists had to say about the report and the outlook for the labor market:
The payroll gain of 1,000 jobs is "quite shocking. … I would certainly have not expected anything resembling that."
-- Bill Cheney, chief economist at John Hancock Financial Services * * * The miniscule payroll gain "calls into question a strong recovery in the labor market" despite the drop in the jobless rate.
-- Bill Quan, an economist at Mizuho Securities
--------------------------------- DOW JONES REPRINTS --------------------------------- This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, use the Order Reprints tool at the bottom of any article or visit: www.djreprints.com. • See a sample reprint in PDF format • Order a reprint of this article now. --------------------------------- * * * "Over the next few months, all the signs are that payroll employment will rise dramatically." But this report "does not help the cause of a May tightening" of the Fed's monetary policy.
-- Ian Shepherdson, chief U.S. economist at High Frequency Economics * * * "Even the positive signal from additional [temporary-worker] hiring is offset by a shorter workweek. The [Fed] will not begin to raise interest rates until substantial job creation returns regardless of how strong economic growth is."
-- Steven Wood, chief market economist at Insight Economics * * * "The continued softness in employment suggests productivity growth remains very strong, supporting profits … and GDP growth. For a market keen to gauge when the Fed may begin to tighten, today's disappointment should push expectations of the first move later in 2004."
-- Daragh Maher, economist at ING Capital Markets. * * * "We're at least about three to four million jobs below where we should be."
-- James Glassman, economist at J.P. Morgan * * * "We don't have evidence of solid job creation, and that must be factored into economic and financial projections for the rest of the year."
-- William Sullivan, senior economist at Morgan Stanley * * * "Disappointing employment implies more productivity rather than lower [gross domestic product] for late 2003. Signs of a significant employment turn, including weekly claims and business surveys, imply a pickup in early 2004. We do not alter our U.S. expectations for 2004. Lack of employment in this report only highlights the ongoing employment risk."
-- Stephen Gallagher, chief U.S. economist, SG Corporate & Investment Banking
Write to the Online Journal's editors at newseditors at wsj.com2
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