October 5, 2007 (Jobs Byte)
By Dean Baker
The hourly wage has risen at a 4.3 percent annual rate since June.
The establishment survey showed the economy adding 110,000 jobs in September, 73,000 in the private sector. There were also substantial upward revisions to job growth reported for July and August, bringing the three month average for the economy as a whole to 97,000, and to 74,000 for the private sector.
The gain in private sector employment in September was more than accounted for by an increase of 44,000 jobs in the education and health services sector and 35,900 jobs in the accommodations and food services sector. These two sectors have accounted for all the private sector job growth over the last three months.
The household survey showed little change in the unemployment rate at 4.7 percent. The employment rate was also essentially unchanged at 62.9 percent, but it stands 0.5 percentage points below its cyclical peak of 63.4 percent last December. The falloff is attributable to declining employment rates among younger workers of both sexes, as workers over age 55 continue to get a disproportionate share of employment gains. They accounted for 238.5 percent of reported employment growth over the last three months and 72.0 percent of employment growth over the last year.
There was little clear trend in other data in the household survey. Involuntary part-time employment fell slightly but it is still more than 200,000 higher than the June level and 400,000 higher than the year ago level. The average duration of employment spells fell slightly, but the median duration and percent unemployed more than 26 weeks both rose.
Most sectors in the establishment survey showed weak growth or declines. The residential construction sector is finally showing substantial job loss, losing 46,500 jobs over the last two months. By comparison, the sector reported losing 108,500 jobs over the prior ten months. This decline is just 3.2 percent of total employment, even though residential construction had fallen by nearly 20 percent.
Manufacturing is again losing jobs at a rapid pace, shedding 63,000 jobs over the last two months. This job loss was broadly distributed within manufacturing. The durable goods sector lost 37,000 jobs over this period, while non-durable goods lost 26,000.
The financial sector is also now shedding jobs at a rapid rate, reversing strong growth earlier in the year. It has lost 28,000 jobs in the last two months, undoubtedly reflecting the wave of layoffs hitting the mortgage sector. This will continue in the months ahead. Remarkably, jobs in the real estate sector remain largely unaffected thus far, employment is up by 18,100 from year ago levels. Temporary employment fell by 19,600 in September. It is down by 64,000 since April.
Wage growth remains relatively healthy. The annual rate of wage growth for the last three months was 4.3 percent. This is up slightly from the 4.1 percent rate over the last year. With inflation at slightly under 3.0 percent, this is sufficient to allow a respectable pace of real wage growth, if it can be sustained.
This report also included the preliminary benchmark revision for March of 2007. It showed the economy created 297,000 fewer jobs than had previously been reported. This implies a somewhat weaker pace of employment growth over the year from March 2006 to March 2007, although it raises the reported rate of productivity growth by approximately 0.2 percentage points. However, the average rate of productivity growth over the last three years is still below 1.5 percent.
The net picture in this report is fairly ambiguous. The job growth reported for September is largely in line with expectations, but the upward revisions for the prior two months indicate that the labor market has been somewhat stronger than previously believed. Still, there is considerable basis for concern about this pattern of growth. Manufacturing employment may stabilize in the months ahead, but construction employment will almost certainly continue downward. It is unlikely that the job growth in health care and restaurants will be sufficient to keep the labor market strong. At the same time, the Fed may be hesitant to respond to a weakening labor market because of continuing weak productivity growth coupled with relatively healthy nominal wage gains.
Dean Baker is co-director of Center for Economic and Policy Research in Washington, DC.
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