By Steven Drexel
Special to the Business Journal
Little has changed recently with respect to the economic outlook. The popular view is the economic recovery remains solid with gross domestic product expected to grow at a robust 4.5 percent annual rate during 2004. During the latter part of 2003, analysts were accustomed to rising expectations each month as industrial activity along with retail sales, housing starts, consumer confidence, corporate profits and, at long last, employment improved.
During January and February of this year, expectations have been steady rather than accelerating and the general economic indicators are supporting the solid recovery. But, rather than gaining momentum, as was the case late in 2003, the recovery appears to just be holding steady. Even still, with this improved picture, there has been a decline in consumer confidence. The cause is related to the employment situation and the political environment.
While employment has been growing, January’s growth was not at the expected or historical rate associated with a normal recovery. Particularly severe winter weather and continuing improvement in productivity certainly muted the growth in employment. The silver lining in all of this is that weather issues will be behind us with Spring right around the bend, plus we already know that the current output in productivity is not sustainable for much longer. With those pieces of positive news, employment will likely get back on track.
The presidential primary process has also given rise to negative discourse on job creation. This political debate also negatively and, to some extent, artificially influences consumer confidence. In the final analysis, general economic growth remains strong and employment growth will continue to improve albeit at a rate that is slower than we would like.
Some Additional Observations
1) February Unemployment Number – It will probably be unchanged from January’s 5.6 percent
February is not a historically strong month for employment growth and I believe weather continues to be a depressing factor. Still, I expect job creation to be better than the 112,000 jobs created in January. I think the unemployment rate is likely to be unchanged as the increase in employment is offset by an increase in the number of jobseekers.
2) Is 2004 going to be a banner year for employment? Some analysts are backing off their numbers but I believe we’ll see some robust growth later in the year.
I think employment growth will reach a robust run-rate by the second half of the year but because the acceleration is delayed until later in the year, the cumulative growth will not be what the administration predicted.
3) The effect of offshoring jobs – This topic probably gets more press than it deserves.
On the margin, the offshoring of some jobs may mute employment growth but I don’t think it will wipe out the effect of a cyclical employment recovery.
Steven Drexel is the president and chief executive officer of CORESTAFF.