Despite Economic Slowdown, Services Going Strong
(03/09/01, 4:33 p.m. ET) By Mary Mosquera, TechWeb Finance
The economy may be in a slowdown, but the service sector that encompasses the knowledge industries is still humming, the Labor Department's monthly employment report showed Friday.
Despite media headlines of deep cuts in dot-coms, jobs in IT services are still nearly 6 percent ahead of last February. Companies added 15,000 computer and data-processing positions in February, for a total of 2.01 million jobs, 0.8 percent more than the previous month. In January, the IT sector increased by 4,000 jobs. Computer-intensive engineering and management services gained 7,000 jobs in February, for a total of 3.5 million, 0.2 percent more than in January, which saw an increase of 12,000 jobs. And while computer makers saw jobs unchanged at 363,000 in February, that is better than some other manufacturers.
Business investment for equipment and computer software accounted for a record 10.4 percent of economic growth in 2000, said Michael Niemira, senior economist at the Bank of Tokyo-Mitsubishi.
"Firms still have more technology investment to do," said Scott Brown, chief economist at Raymond James & Associates. "The current retrenchment will give way to renewed capital spending at some point."
The unemployment rate held fast at 4.2 percent in February, while the economy created a larger-than-expected 135,000 jobs, the government said. In January, the economy saw an increase of 224,000 jobs.
The average overall U.S. job growth in the first two months of 2001 was 179,500, slower than the year-ago period, but stronger than the 44,500 average in the final two months of 2000, suggesting the slowdown may have hit bottom.
Manufacturing, where the economy is weakest, lost 94,000 jobs in February, while services, which includes computer, Internet, and engineering services, gained 95,000 jobs. Employers added 87,000 service jobs in January.
The question of whether the recession in manufacturing will spill over into services remains, Niemira, said.
"We're basically going through a transformation of our economy where manufacturing is declining and services are increasing," said Labor Secretary Elaine Chao. "It demonstrates the need for more training and development for workers as they try to transition."
Niemira said the data did nothing to change his view that the economy is potentially still on the verge of a recession.
Business investment and resulting long-term productivity gains are the chief economic concerns now, said Brown said. Growth in productivity, or the amount a worker produces per hour, is the only way to improve the standard of living. And technology investment has been key to productivity advances, he said.
In the latest data this week, productivity of American workers increased 2.2 percent in the fourth quarter, which is considered strong, but less than the 3 percent from July through September 2000.
The hourly pay of U.S. workers increased 7 cents, to $14.10, or 4.1 percent over the year.
The surprising job picture means the Federal Reserve may not cut interest rates as aggressively when it next meets on March 20. |
