"The American economy is the energizer bunny: It just keeps chugging along"-Economist
January Job Growth Is Double Predictors' Forecasts
By SYLVIA NASAR -- February 6, 1999
NEW YORK -- Despite freezing weather across much of
the nation and a financial meltdown in Brazil, the
U.S. economy barreled ahead last month and created a
quarter of a million new jobs.
The January job growth, reported Friday by the Labor
Department, was twice what forecasters had predicted.
But even with a heavy influx of workers into the labor
force in January, unemployment stayed at 4.3 percent --
the lowest level in 28 years.
The Labor Department lowered December's job gain to
298,000 from the 378,000 it had initially reported.
Still, nearly a quarter of a million jobs have been
added in each of the last 12 months on average, making
the labor market look stronger than at any time since
the height of the Vietnam War.
That buoyancy has many
forecasters, most of whom were
predicting a broad slowdown
just weeks ago, now saying
that 1999 is likely to become
the fourth consecutive year
that economic growth will be
well ahead of the long-term
trend of roughly 2 to 2.5
percent a year.
"The American economy is the
energizer bunny: It just keeps
chugging along," said David
Wyss, chief economist of
Standard & Poor's DRI, who
predicts the economy will grow
3.5 percent this year. If that
happens, as many forecasters
now predict, unemployment will
fall even further.
Stock market investors
shrugged off the jobs data
Friday, hoping that a strong
economy would bolster
corporate profits and easily absorb the effects of
rising interest rates.
With job losses easing in manufacturing and with hiring
robust in construction and services, the portion of
Americans with jobs has leapt to an all-time high of
64.5 percent. (In Germany and France, by contrast, the
figure is below 50 percent.)
More than half of the new jobs last month were in
managerial and professional occupations, leaving just
two out of every hundred college graduates out of work
-- most of them simply in transit from one job to
another.
In parts of the Midwest and South, namely Fargo, S.D.,
and Raleigh-Durham, N.C., unemployment has dropped
close to 1 percent.
On average, the Midwest had the lowest unemployment,
3.5 percent as of December, the latest regional figures
available. The West had the highest jobless rate, 5.2
percent in December.
And there are still some pockets of relatively high
unemployment. In the New York City area, unemployment
has fallen to 6.8 percent, down sharply from the 8 to 9
percent level of just a couple years ago. Still, its
unemployment rate -- along with that of Los Angeles and
Miami -- is one of the highest among cities with
populations over 1 million.
Over all, the chief worry now is that things may be
getting too good. Investors saw the specter of higher
interest rates in Friday's report.
Alan Greenspan, chairman of the Federal Reserve Board,
warned last month that he and his colleagues, who left
rates unchanged at their most recent monetary policy
meeting, were watching for signs that the tight labor
market was fueling wage inflation. And while the
broadest, most reliable measures of labor costs have
been holding steady, the report Friday showed that
hourly earnings for production and other rank-and-file
workers jumped 6 cents last month, to $13.04. That
brings the rise over the last 12 months to 4 percent,
well above the 1.6 percent rate of inflation and even
the strong 2.7 percent gain in productivity.
Executives in most industries are complaining about
rising job turnover and the difficulty of finding
qualified workers. According to a new survey by the
Olsten Corp., a temporary-help company, 77 percent of
employers reported shortages of workers, up from 69
percent in 1998. Hardest to find are computer
programmers, accountants and financial professionals,
but entry-level sales, telemarketing and medical
workers are also scarce.
The shortages help explain why businesses are again
spending heavily on new machinery and equipment.
Companies are not only substituting technology for
bodies, but are also trying to replace skills with
software. McDonald's, for example, now has pictures of
burgers and shakes, not words, on its cash registers.
But what is a worry for Greenspan and a headache for
employers is a terrific boon to workers, especially
those at the bottom of the pay ladder who have had the
most trouble getting and keeping jobs, especially good
ones. Unemployment among both black and Hispanic
workers, already the lowest in a generation, drifted
even lower last month. So did unemployment among
workers with only high school degrees.
As it happens, gains for the bottom one-fifth of
workers have been occurring for a while now, said Jared
Bernstein, an economist at the Economic Policy
Institute. He cites as an example young black women
with only high school degrees, a group that typically
has had extremely high unemployment rates. But the
portion with jobs has leapt by 10 percentage points, to
58 percent, in the last four years.
"That increase is historically unprecedented," said
Bernstein, who notes that the hottest topic among
scholars who study labor markets now is "why this
recovery has been so good to folks at the bottom." The
gains have come not just in jobs, he points out, but,
equally important, in pay and training opportunities.
The sources of the strong labor market are not exactly
a mystery. Troubles in the rest of the world may have
sliced deeply into exports from the United States and
caused job cuts in factories. But they have also
indirectly fueled consumer and business spending by
pulling inflation and interest rates down. Prices for
raw materials and imports generally have fallen,
intensifying price competition and prompting foreigners
to snap up American stocks and bonds. And all that
domestic spending -- on everything from computers and
cars to new houses and furniture -- means more jobs.
In January, virtually the only corners of the economy
with accelerating job losses were the oil patch and the
mining industries, battered by the lowest commodity
prices since the collapse of energy prices in the
mid-1980s. Makers of heavy machinery, which depend
heavily on foreign markets, cut 9,000 jobs last month.
But other manufacturers, namely auto makers and
companies that cater to the construction trades, added
workers.
Job losses for manufacturing as a whole have slowed
sharply. Just 13,000 jobs, on net, disappeared last
month, the smallest loss since September. The weaker
dollar may be helping. American manufacturers are a lot
more competitive at 113 yen to the dollar than they
were at 147 yen last summer.
The boom in construction continued despite blizzards in
the Midwest and Northeast, with 15,000 construction
jobs added on top of 99,000 jobs in December.
Copyright 1999 The New York Times Company |
