Report Says U.S. Manufacturing Is Growing With No End in Sight --''''>
By SYLVIA NASAR -- July 3, 1999
After idling in May, the great American job
engine is purring again.
Despite another big drop in factory jobs, the
nation's employers added more than a quarter
of a million new workers to their payrolls in
June. The overall gain, of 268,000, followed a
decline of 5,000 in May. Nearly two of every
three Americans -- a record -- were at work
last month. And the pay of rank-and-file
workers jumped 5 cents an hour, to $13.23.
With the labor market tighter than at almost
any other time in the last three decades,
Americans who have jobs are starting to act a
bit cockier -- something that they have
refrained from doing until very recently. In
June, the so-called quit rate -- the fraction of
people looking for work who left their last
jobs without having lined up another -- rose to
14.5 percent, the highest level since the end of
the long, strong 1980s boom. The rate is a
classic barometer of consumer confidence,
which by other accounts has recently
strengthened.
In short, the economic picture that persuaded
Alan Greenspan, the chairman of the Federal
Reserve, and his colleagues to nudge up a key
interest rate by a quarter of a percentage point
on Wednesday was not materially altered by
the report issued Friday by the Labor
Department. Though the economy may no
longer be in overdrive, as it was last winter, it
still has enough momentum to keep spending
and production stronger than the central bank
-- worried that the longest peacetime expansion
ever will rekindle inflation -- would like.
"The economy is still very strong," said Joshua
Feinman, chief economist at Deutsche Asset
Management. "Whatever concerns Alan
Greenspan had about a shrinking pool of
workers, he's still got them."
Labor Secretary Alexis Herman said simply,
"The sun is shining brightly."
True, the unemployment rate edged up slightly
to 4.3 percent in June from 4.2 percent in May.
But Katherine Abraham, the commissioner of
the Bureau of Labor Statistics, which issues the
monthly jobs report, said the uptick was not
statistically meaningful and called the
unemployment rate "essentially unchanged." It
has remained between 4.2 percent and 4.4
percent since November.
In June, the bureau's survey of households (on
the basis of which the unemployment rate is
calculated) showed that the number of new
entrants to the labor force rose even more, by
nearly 400,000, than the number of new jobs --
yet another sign that Americans are more
confident than ever that work is there for the
asking. Meanwhile, the number of discouraged
workers -- those who are not looking because
they think there are no jobs for them -- has
dwindled to just over 200,000 in the entire
country, down 90,000 from a year ago.
Among the unemployed are plenty of people
looking for better positions. A bigger portion
of people who are job hunting -- not those
who retired or returned to school or decided to
stay home with a child -- told their bosses to
get lost even though they did not have
alternative work. This rate, now at 14.5
percent, is still shy of its peak of 16.5 percent,
reached in January 1990. But it is a lot higher
than in mid-1996, when it was below 10
percent.
The biggest beneficiaries of the current
demand for labor, of course, are groups of
workers who have traditionally suffered the
most joblessness. The unemployment rate for
African-Americans, already at a record low,
dropped by a couple of tenths of a percentage
point last month, to 7.3 percent, half the rate
during the last recession. Joblessness among
Hispanic workers, 6.8 percent, also remained at
close to a record low.
The report issued Friday was only one of many
recent indications that the economy continues
to barrel along at a pace well above its
long-term trend, which most economists
consider to be 2.5 percent to 3 percent a year.
With income growing at a rapid clip and
corporate profits firming, spending by
consumers and businesses has remained
robust, and despite the yawning gap between
the amount of goods imported and exported,
domestic production has been picking up, too.
The only sector of the economy that had been
suffering from serious weakness and had
restrained overall growth -- manufacturing -- is
pretty clearly on the mend. The most recent
reading by the National Association of
Purchasing Management suggests that output
has expanded for five consecutive months
even as inventories shrank relative to sales and
as order backlogs swelled.
The policy makers at the Fed will be looking at
such numbers before their scheduled meetings
later this year. "Will the world look different
on Aug. 24 or Oct. 25 than on June 30? We
don't think so," said Ed McKelvey, senior
economist at Goldman Sachs, which estimates
that the gross domestic product grew at an
annual rate of 4 percent in the second quarter
and predicts that the Fed will probably raise
rates more.
Admittedly, the rebound in industrial
production has not translated into more hiring.
Factory payrolls shrank by 35,000 in June,
mostly because of job losses in aircraft,
electronics and apparel, bringing the total
number of manufacturing jobs that have
vanished in the last 15 months to nearly half a
million. But hiring typically lags behind sales
increases as companies initially try to fill the
extra orders by adding hours and improving
efficiency.
Indeed, the Labor Department reported that
overtime edged up to 4.7 hours a week in June
from 4.6 hours in May and the factory
workweek got a tad longer. It is also possible
that manufacturers are letting temporary-help
outfits, which are classified as service firms,
do the first round of hiring. "We're probably
not accurately capturing the number of people
actually work in factories," Feinman
speculated. The temporary-help industry added
19,000 workers in June, the ninth straight
month of increases.
Meanwhile, construction employment
rebounded in June after dropping sharply in
May. (It turns out that the May decline was
mostly a reflection of last winter's warm
weather, which disrupted the usual seasonal
hiring pattern.) Although the housing boom
has already cooled with higher mortgage rates,
contractors hired 26,000 workers last month,
many of them plumbers, roofers and
electricians,
As usual, the part of the economy that did the
bulk of the hiring in June was the sprawling
service sector, which includes everything from
the corner copying store to giant multinational
banks. These companies hired a total of nearly
300,000 workers. On one end of the pay and
prestige spectrum, banks, brokerage firms and
other financial institutions added some 13,000
workers. At the other extreme, retailers added
some 50,000 workers, nearly half of whom
wound up waiting on tables or working cash
registers in restaurants or bars. Seasonal
businesses -- amusement parks, lawn services,
hotel chains, movie theaters -- did lots of
hiring, too.
Amazingly, the tight labor market has not
brought on much inflation. Even with the
5-cent increase in average hourly earnings, pay
is up just 3.7 percent from a year ago. That is
about half a percentage point less than the pay
increases employers were handing out last
summer.
Copyright 1999 The New York Times Company |
