With Companies Still Gloomy, Payrolls Shrink by Thousands

he nation continued to bleed tens of thousands of jobs in December, the Labor Department reported yesterday, jolting forecasters who had expected a modest upturn in employment and suggesting that American business remains highly pessimistic about the economic future.

Payrolls in nonfarm businesses, adjusted to account for normal seasonal variations, dropped by 101,000, and the unemployment rate stayed at 6 percent. The Labor Department also revised the number of jobs lost in November to 88,000 from 40,000.

Though cornerstones of economic growth — like increasing productivity and financial stability — remain intact, companies have been unwilling to expand production or commit themselves to investments in new equipment that would support job creation. Retail spending and corporate profits have edged upward slightly, but a rush of new jobs still seems a long way off.

Elaine L. Chao, the secretary of labor, said that higher earnings would have to come first. "The profit picture is not that strong, so that is not an encouragement to business owners to engage in permanent hiring," she said. "Employers are relying on overtime and short-term help."

Analysts said the disappointing job figures were sure to turn up the heat under the debate in Congress about the best way to stimulate growth in the lagging economy.

In a speech delivered after the Labor Department released its report, Vice President Dick Cheney lashed out at critics of the administration's $674 billion tax cut plan, saying that the White House's "jobs and growth" package would not only revive the economy but ultimately cut the budget deficit. [Page A12.]

Prominent Democrats, however, said the plan would do little to overcome the severe inertia in the labor market.

"Most economists agree that the Bush plan is not a stimulus plan at all and will not have any real immediate impact on the economy," Nancy Pelosi, the House Democratic leader, said. "When is President Bush going to realize that job creation needs to be his top priority?"

The roots of the problem may be too ephemeral to attack directly, however. According to business leaders and analysts, deep feelings of uncertainty among corporate executives and consumers alike are holding back an economic resurgence.

"The cycle itself has been of such a different nature — what C.E.O.'s would complain of as a lack of visibility — that they don't have a clear mental model of how things might move forward," said Bill Martin, chief economist at UBS Global Asset Management.

Prospects for growth are also being hurt, said Christopher J. Wolfe, United States equity strategist for J. P. Morgan Private Bank, as companies that overextended themselves in the last boom sell assets to pay off debt. Despite low interest rates, Mr. Martin added, many companies worry that taking on more debt to finance investment could lead to worse credit ratings, or even bankruptcy.

The concerns would not be so great, except that businesses are hesitant to rely on further growth in consumers' willingness to spend. Bruised portfolios, terrorism and the risks associated with a war in Iraq are finally taking their toll, said John J. Castellani, president of the Business Roundtable, an association of top corporate executives.

"The issue has not been the cost of capital," he said. "The issue has been demand for the products and the services."

On Wednesday, the Federal Reserve reported that consumer credit had dropped for the first time in four years. The decline of $2.2 billion was the biggest since October 1991.

"We are starting to see more adjustment by the consumer," Mr. Martin said, citing rising savings rates as a threat to demand in the short term. The continuing hemorrhage of jobs could add to consumers' fears, he said.

Manufacturers of long-lasting goods made more heavy cuts last month, with 46,000 positions eliminated. Even if the economy returns to strong growth, those jobs may not return. "All the jobs that have been lost in the United States in manufacturing have essentially been recreated in China," Mr. Wolfe said.

Restaurants and bars cut 63,000 jobs on a seasonally adjusted basis, signifying a holiday season of muted celebrations — at least in comparison with those of the recent past.

Unemployment among teenagers fell slightly, to 16.1 percent from 16.8 percent, but joblessness among black workers grew to 11.5 percent, from 11 percent, the highest rate since May 1994. For the average American worker, wages and hours of work per week changed little in December.

In the last two years, the government tried to help the economy mainly by propping up consumers through lower interest rates and cuts in income taxes. On Tuesday, the president proposed a further package of tax cuts worth $674 billion over 10 years, but it is unclear how much consumers' spending would respond to its biggest component, the abolition of the tax on dividends.

"It is exceedingly difficult to parse," Mr. Wolfe said. "We're struggling with the net effect on consumption." His team has estimated that spending may rise by at most $30 billion as a result of the change, he said, "and it's probably a lot less than that, at least in the short run."

Some economists gave the Democratic plan, announced on Monday, a better reception. It would inject $136 billion into the economy, mainly through aid to the states and through tax rebates that can affect spending quickly.

"I agree with the Democratic plan much more than the president's," said William C. Dudley, chief United States economist at Goldman, Sachs. "But I would make the Democratic plan a little bigger and extend it into 2004."

Other experts did see some potential for job creation from ending the taxation of dividends. Tracy G. Herrick, chief investment strategist at Jefferies & Company, an investment bank, said that some of the extra cash would flow to well-off small-business owners through their own portfolios. "Small businesses tend to be not investment-intensive," Mr. Herrick said. "They tend to be more people-intensive. The orders come from big companies, and jobs are created by the little companies."

So far, however, the job market has offered little relief to people like Terry Gilliam, who had worked in the hotel industry in Philadelphia and has been looking for a job since July 2001. She is not eligible for the latest extension of unemployment benefits, signed this week by President Bush, because her original benefits ran out in September. About one million Americans are in the same predicament, according to the Center on Budget and Policy Priorities, a liberal research group in Washington.

"I've been working over 20-something years and having that money taken out of my check," Ms. Gilliam said. "The unemployment fund has billions of dollars in it for this purpose. I don't understand it."

Ms. Gilliam, who said that she had heard about the re-employment accounts that President Bush proposed to reward people looking for new jobs, said that she was already doing everything she could to find work. The number of jobless who have been looking for work for more than six months rose for the fourth month in a row, to 1,856,000 — the highest level since February 1993.

"I'm looking for anything that I can apply my skills and knowledge to," Ms. Gilliam said from her home in Philadelphia, having returned hours earlier from a job interview. "If I get $3,000, I'll be using it to eat and pay my gas, electric, phone and rent."

Experiences like Ms. Gilliam's notwithstanding, at least one forecaster saw the report on employment in a more positive light.

"Most of the weakness is where we would have expected it, and it's not broadly based," Mr. Herrick, the Jefferies & Company strategist, said. "Things are right on schedule for moderate growth of 3 percent or 3.5 percent for the year as a whole, which wouldn't be that bad at all."

Historically, a rise in temporary employment has been a reliable short term leading indicator of economic recovery. It means that there is increasing work but just beginning to outgrow existing employment levels.

If Demosthenes' parents' business continues to thrive it will mean good things on the job front fairly soon. (assuming no intervening economic disruptions, of course, not a real safe assumption...)

Historically, a rise in temporary employment has been a reliable short term leading indicator of economic recovery. It means that there is increasing work but just beginning to outgrow existing employment levels. If Demosthenes' parents' business continues to thrive it will mean good things on the job front fairly soon. (assuming no intervening economic disruptions, of course, not a real safe assumption...)

You are right about the concept, but that is not what is happening. Demosthenes parents are an anolmaty(sic). The overall pattern of "temporary work", eg. EDS, Compuware, Kelly Services, Perot, and other temporary contract services are still laying off by the tens of thousands.

December was a very poor and worse month for "temporaries".

There are so many fat, stupid, lazy paper shuffling, "How do I do an e-mail attachment of my dog's picture?

Based on the recent upheaveal about the policeman in TN killing the dog, I would say you are just about right. What is really important doesn't matter any more.

Based on the recent upheaveal about the policeman in TN killing the dog, I would say you are just about right. What is really important doesn't matter any more.

I dont understand your point??

I saw that dog. I saw the video. It was a small dog, with its tail wagging, slowly walking in a round about manner in the grass by the car, not threatening to anyone or attacking anyhone at all. I would not have been threatened by that small little non-aggressive dog with its tail wagging.

The had better think twice … it is probably illegal for a Chinese Corporation to employ a foreigner – except as a spy.

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It's not illegal unless things have changed. When the Chinese began their economic and scientific build-up program the Chinese goverment contacted me to come there to work as a research and development engineer/scientist at a good salary. If you are tops in your field the Chinese government will track you and contact you. I elected not to go. But the Chinese don't want to hire the kinds of American idiots who are brokering American destruction. They are useless goofs here and they would be useless goofs there.

Creative destruction is the heart of the American market-based economy. You must be one who is doing the “creative destruction.” Many others like myself, however, are the ones being “creatively destroyed.” How nice that we have such a diverse “market-based economy.”

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The creative destruction bit is one of an array of cliches that mindless hack employ as a rote reflex. When they want to say something they reach up their behinds and pull one out.

Unless the economy turns around THIS year, Bush will be a one term president like his father.

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If Bush is going to do what he is doing to this nation, excluding the diversion of bombing ragheads, why should he be preferable to a Democrat? Neither I nor others should tolerate a moron in the White House just because he calls himself a Republican.

Really? Good. About 25% of the people I see should be sucking on pebbles to fight hunger pains. There are so many fat, stupid, lazy paper shuffling, "How do I do an e-mail attachment of my dogs picture?" oxygen thieve that believe their employer owes them a total stress free, Zen state, self- esteem fulfillment experience

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...and the globalistic multiculturalistic concept is made to service them. Right now the Republicans are just as supportive of it as the Democrats.

I dont (sic) understand your point??

I know. Many people these days don't because their priorities are totally inverted from what they should be. First, God is most important along with His will for us found in the Bible. If that is not right, nothing else will be. Next, people are more important than animals. When we start making animals more important than people, then we start treating people like animals and animals like people.

What part of "Certain things are MORE important than getting upset over an injustice to a dog." do you NOT understand?

I live in Highlands Ranch, Colorado, the southern most part of the Denver area. We have been labeled as the richest county in the US by income, the most expensive homes on average, and......the highest percentage of delinquent loans and foreclosures in the country.

I believe the numbers are that 60% of all homes are one month late, 23% are two months, with a foreclosure rate of 7%. If true, I believe it is because the tech sector sucks and 65% of people living here participate in that sector.

I believe the numbers are that 60% of all homes are one month late, 23% are two months, with a foreclosure rate of 7%.

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I think what you are describing is the tip of an iceberg that is occuring across the broad spectrum of the economy.

"Move to the jobs." You mean move to Mexico, India, or China?

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In many cases relocation is a prohibitively expensive venture to a new area that is no more economically stable that the area one leaves.

I agree with what you say here quoted above, but I would not have shot that dog, and I would not have shot your dog, even if I saw your dog walking around like that one did.

In those industries where the cost of labor is the primary difference in the cost of producing a good and getting it to market, production will shift to the producer who has lower labor cost. This shift is accelerated in a world where barriers to trade are coming down. If all other factors remain constant, this will lead to a decrease in revenue to businesses that pay relatively higher wages to comparable workers, resulting in a contraction of those businesses and more unemployment.
The benefit of this to consumers, assuming all other factors (personal income, for example) remain constant, is a higher standard of living as the cost of goods fall.

you guys are missing something, it isn't just the family business that's doing well.

The national retail chain I work for is also up double digits in gross profits over last year. There are a lot of companies in this country who failed to meet PROJECTED earnings, and that's being construed as BAD news. Ignore the fact that their profit margin was only 12% instead of 15% like they promised wall street.

by comparison, anything that isnt a tech boom, no matter how profitable, will appear to people to be success, but not "real" success....you know, what is the gauge anymopre for a healthy economy? Whose opinion do you trust?

One other thing...the temp industry has never taken jobs away from perm employees, and only in extremely rares cases has it prevented an employer from hiring perms over temps. Temps are hired to fill production shortages, and often become perm labor after a probationary period. In some small factories, temps are used exclusively to remove the burden of payroll and tax responsibility from the management, who is opften times too small to handle it all.

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