Call it the mystery of the missing jobs, a kind of economic whodunit.
Over the past two months, the economy has added only 118,000 new positions - hardly enough to provide the growth that will keep the country on a roll in 2004. This is not what economists - from the White House to Wall Street - expected. Is it the weather? Employees working smarter and more productively? Or perhaps it has more to with some fundamental change, such as jobs drifting overseas. The culprit isn't clear.
Unless the missing jobs turn up soon, there are serious ramifications - from the presidential race to the economic prospects for later in the year. The consumer, still buoyant, could become more timid. And, business, which has put off hiring new workers to date, could continue to keep a tight lid on spending.
"We've had six months in a row of piddling increases, there's not any joy," says Stuart Hoffman, chief economist at PNC Financial Services Group, Inc., in Pittsburgh.
The good news from the bad news is that the bond market now expects the Federal Reserve to remain on the sidelines at least through June, possibly August. With the fall election, that may mean the nation's central bank keeps rates low through the rest of the year, bringing another round of mortgage refinancing and help for the auto industry.
The latest news on the job front came Friday when the Department of Labor reported that the February unemployment rate remained at 5.6 percent. Economists pointed out, however, that some 392,000 dropped out of the labor force. Without those dropouts, the unemployment rate would have risen to 5.8 percent.
Democratic candidate Sen. John Kerry of Massachusetts immediately attacked President Bush over the new numbers. He told reporters in Boston, "At this rate the Bush administration won't create its first job for more than 10 years."
The Bush campaign immediately responded that the job report "demonstrates the importance of having a president in the White House who is committed to a vigorous job-creation agenda of lower taxes, lower healthcare costs, and lower energy costs."
Some economists think the rhetoric might slow down soon as the economy returns to job creation. They point to declining new jobless claims, reports of a sharp drop in layoffs, business surveys that indicate managers expect to hire new workers, and an increase in temp jobs - sometimes an indication of future hiring. "They are all good leading indicators that things should improve soon," says John Bitner, chief economist at Eastern Bank in Boston. "I would think by early summer we're going to be getting job creation of 150,000 per month."
In fact, as spring nears, some economists expect the numbers to start improving as home builders can start to dig footings. Some of the stimulus in the economy, Mr. Hoffman points out, includes another wave of mortgage refinancings and income tax refunds. "There is still stimulus in the pipeline for another three or four months," he says.
But, some others think the US may not get new job growth in this economic cycle. They see companies focusing more on productivity, training their current employees instead of hiring new ones. "Productivity gains are going to prevent the kind of job growth creation [seen] in the 1990s," says John Challenger, CEO of the Chicago-based outplacement firm, Challenger, Gray & Christmas, which tracks labor issues. The latest job numbers, in fact, back up Mr. Challenger's theory. The length of the work week is up, as is overtime.
Companies are focusing on improving productivity even during a time when they have strong balance sheets. "Profitability this year should be pretty good," says Jose Rasco, a senior economist at Merrill Lynch & Co. in New York.
But, rather than investing in new hires, Mr. Rasco thinks companies are using the money to buy other companies. Merger and acquisition activity is on the rise.
Another reason for the slow job market, says Rasco, is the war in Iraq. "You can drop bombs or you can use the money to train people."
The rising cost of healthcare is yet another dynamic working against growth. Rasco says some companies are justifying rehiring employees but at reduced pay to cover ever increasing medical costs.