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U.S. Ended 2004 With Gain in Payrolls

Job Increase First Since Recession

By Nell Henderson and Amy Joyce
Washington Post Staff Writers
Saturday, January 8, 2005; Page A01

Employers added 2.2 million jobs in 2004, the first annual increase in payrolls since before the 2001 recession and a turning point for the nation's labor market after three years of job losses.

The job gains represented an increase of less than 2 percent in an economy with more than 130 million nonfarm payroll jobs, and it was smaller than the yearly growth tallied during the last years of the 1990s economic boom.

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Bureau of Labor Statistics: Dec. 2004 Employment Situation Report

But the number was strong enough to help push the unemployment rate down to 5.4 percent in December from 5.7 percent a year before, the Labor Department reported yesterday, with employment growing in areas such as professional and business services, education, health care, government and manufacturing. Any increase in the national job count was welcome after the losses suffered in the 2001 recession and the "jobless recovery" of 2002 and 2003, during which employers kept slashing payrolls even as the economy grew.

"The good news is that the jobless recovery is reliably behind us," said Jared Bernstein, senior economist at the Economic Policy Institute, a think tank that focuses on labor issues. "Most industries are expanding, though there are signs that employers have not fully abandoned their cautious hiring practices."

Employers had cut jobs during those years as the economy was buffeted by a series of shocks, including the bursting of the stock bubble, the Sept. 11, 2001, terrorist attacks, corporate finance scandals, and apprehension about the wars in Afghanistan and Iraq. Companies continued trimming as global competition forced them to reduce labor costs, often by moving production offshore. Businesses also found ways to use new technologies and business practices to boost efficiency and increase worker productivity, or output per hour of labor.

The job losses alarmed some labor advocates who worried that they resulted from structural economic changes that might continue to suppress employment growth for years. The problem also became political fodder during President Bush's first term, as he used the weak job market to justify his tax cuts while Democratic critics argued that his policies were misguided and ineffective.

At the recent low-point for the job count, in August 2003, the nation had 2.7 million fewer jobs than on the eve of the recession. By last month, that deficit had been shaved to 122,000. That gap could be fully erased by the end of this month, according to many forecasts, thwarting Democrats' prediction during the presidential campaign that Bush would be the first U.S. president since Herbert Hoover to preside over a net national job loss in one term.

The jump in jobs last year was the biggest annual increase since 1999, when employers added 3.2 million. Hospital workers, computer systems designers, architects, engineers and financial service providers were among the laborers in strong demand last month.

But signs of weakness persist, with wages rising more slowly than inflation and many workers still struggling to find jobs in a changing economy. Many employers remain reluctant to create traditional payroll jobs -- with health insurance, pensions and permanent status -- preferring to use temporary or contract workers at lower cost. Some who are hiring rebuff low-skilled laborers, including many former factory workers, while searching for more-educated employees with specialized technical, financial and administrative skills.

Still, analysts said, the labor market improvement has been good enough to persuade the Federal Reserve to continue gradually raising interest rates this year to keep inflation under control.

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