Midsummer Slowdown Feared for US Job Creation

07 July 2004

A report by the US Labor Department, revealing that only 112,000 jobs were created by the economy in June, has prompted varied responses from economists.

Some view the findings as merely a brief setback, while others are more concerned that the modest growth – less than half the predicted number – reflects a more serious state of the economy.

Ian Shepherdson, chief economist at High Frequency Economics believes the numbers are caused by seasonal adjustments by the Labor Department, explaining that the "margin of error on these numbers is gigantic."

Wells Fargo's chief economist Sung Won Sohn agrees that one month's data are unrepresentative and the findings represent a "temporary cooling off period" for the economy.

However, he warns of a new, more ruthless side to today's employers: ""now they hire if they have to, and they are willing to cut back quickly if demand falls off."

Other economists, such as Peter E Kretzmer of Bank of America, are of a more pessimistic nature. He sees the report as further evidence for a weakening economy, following a recent slump in sales for some automobile and retail companies including General Motors and Wal-Mart Stores.

Kretzmer has modified his estimate of second quarter gross domestic product accordingly, reducing it from 4.2% to 3.2%. The government's GDP estimate will be released in a few weeks.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff