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<P class=articleTitle style="MARGIN: 0px">Economists Are Surprised<BR>By Meager Payroll Growth</P>
<P class=times><I>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 <A class=times href="http://online.wsj.com/article/0,,SB107365489029582200,00.html?mod=article-outset-box">article</A><SUP>1</SUP>), many were caught off guard. Here's what economists had to say about the report and the outlook for the labor market:</I></P>
<P class=times>The payroll gain of 1,000 jobs is "quite shocking. … I would certainly have not expected anything resembling that."</P>
<P class=times align=right>-- Bill Cheney, chief economist at John Hancock Financial Services</P>
<H3 class=boldFourteen align=center>* * *</H3>
<P class=times>The miniscule payroll gain "calls into question a strong recovery in the labor market" despite the drop in the jobless rate.</P>
<P class=times align=right>-- Bill Quan, an economist at Mizuho Securities</P>
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<H3 class=boldFourteen align=center>* * *</H3>
<P class=times>"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.</P>
<P class=times align=right>-- Ian Shepherdson, chief U.S. economist at High Frequency Economics</P>
<H3 class=boldFourteen align=center>* * *</H3>
<P class=times>"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."</P>
<P class=times align=right>-- Steven Wood, chief market economist at Insight Economics</P>
<H3 class=boldFourteen align=center>* * *</H3>
<P class=times>"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."</P>
<P class=times align=right>-- Daragh Maher, economist at ING Capital Markets.</P>
<H3 class=boldFourteen align=center>* * *</H3>
<P class=times>"We're at least about three to four million jobs below where we should be."</P>
<P class=times align=right>-- James Glassman, economist at J.P. Morgan</P>
<H3 class=boldFourteen align=center>* * *</H3>
<P class=times>"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."</P>
<P class=times align=right>-- William Sullivan, senior economist at Morgan Stanley</P>
<H3 class=boldFourteen align=center>* * *</H3>
<P class=times>"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."</P>
<P class=times align=right>-- Stephen Gallagher, chief U.S. economist, SG Corporate & Investment Banking</P>
<P class=times><B>Write to</B> the Online Journal's editors at <A class=times href="mailto:newseditors@wsj.com">newseditors@wsj.com</A><SUP>2</SUP></P><!-- article end -->
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