U.S. Job Numbers Remain Strong
Saturday, October 7, 2006
Unemployment went down and paychecks went up last month, the government said yesterday, and it added that job growth for the year ending in March may have been far stronger than previously thought.
The announcements were greeted warmly by the White House -- and less so by the financial markets. Stock and bond prices fell amid fears the tight job market, by adding to inflation, will compel the Federal Reserve to hold interest rates steady or even raise them to slow economic growth. Many traders had convinced themselves that the Fed would cut rates early next year, but that looks increasingly unlikely.
President Bush traveled yesterday to a FedEx sorting facility to tout the job numbers and the rest of the Republican economic record a month before congressional elections.
"I'm pleased with the economic progress we're making," he said as other White House representatives used multiple briefings and statements to highlight yesterday's news.
The Labor Department's employment report -- and other figures released last week -- depict an economy that remained generally healthy in September outside of the slumping housing market. Workers found jobs and got paid more, while consumers hit the stores and auto showrooms to spend some of the extra cash gained from falling gasoline prices.
The unemployment rate fell to 4.6 percent in September from 4.7 percent in August, which was down from 4.8 percent in July. The jobless rate has varied from 4.6 to 4.8 percent all year. Considering that a few workers have such poor skills as to be nearly unemployable, many economists consider a rate below 5 percent to constitute full employment, meaning just about every worker with the skills and desire to work can find a job.
Demand for labor helped drive workers' average hourly wages, not including those of most managers, up to $16.84 last month. That's a 4 percent increase from September 2005, the fastest wage growth in more than five years.
But other details in the Labor report bolstered some economists' expectations that unemployment will rise as the housing downturn drags on, cooling economic growth to a below-average pace for many months.
The number of jobs on employers' payrolls rose only slightly in September, as employers turned more cautious in their hiring. Retailers, temporary employment agencies and manufacturers cut nearly as many jobs as other employers added. And a measure of the number of hours worked across the country slipped slightly last month, as it did the month before -- a tentative sign of softening labor demand.
The major stock indicators all fell yesterday, with analysts seeing the weak job growth as further evidence that economic growth is slowing while inflation pressures remain high. The Dow Jones industrial average, which had hit new records on three consecutive days last week, lost 16.48 points yesterday, or 0.14 percent, to close at 11,850.21.
The report reflects "an economy with a solid labor force," said Richard Yamarone, director of economic research at Argus Research Corp. But with low unemployment and rising wages, he said, "there's simply no way you can paint this report other than inflationary."
The Bush administration emphasized the positive. The president's advisers have been frustrated that he gets little credit for an economy that remains healthy by many measures. Just 39 percent of those questioned in the latest Washington Post-ABC News poll in August approved of Bush's handling of the economy, compared with 59 percent who disapproved.
"This economy is strong and growing," White House budget director Rob Portman said during a meeting with reporters. "The president's pro-growth policies, including the tax relief, are working."
Democrats rejected the administration effort as spin. "Under their economic policies, the rich are getting richer, the poor are getting poorer and the middle class is getting squeezed," Senate Minority Leader Harry M. Reid (D-Nev.) said in a statement. "President Bush may be 'pleased' with what his economy has done, but hard-working families know America needs a new direction."
Bush decided to highlight economic issues yesterday by spending part of his morning at the FedEx facility in Northeast Washington. He conducted an hour-long roundtable with business executives who described how they got started, and he used their stories to emphasize his tax cuts and other initiatives.
Bush also said he sees increasing protectionism and isolationism among the American people. When Clifton Broumand, who owns a Maryland company that makes keyboards and computer mice, complained that China rips off designs for his products, Bush shared the lament. "This is the problem," the president said.
Democrats sought to shift attention to slowing economic growth, which has cooled from a torrid 5.6 percent annual rate in the first three months of the year to a pace closer to 2 percent in the second half of the year, by many estimates.
"Slower economic growth is taking its toll on job creation," declared Jack Reed (R.I.), the ranking Senate Democrat on Congress's Joint Economic Committee.
Though unemployment dipped, yesterday's data showed that employers added just 51,000 new jobs in September, a negligible number in an economy with 135.6 million payroll workers.
Labor analysts also released a preliminary finding that the economy may have added 810,000 more jobs than previously tallied in the 12 months that ended in March. If that estimate holds, it would mark a much bigger revision than usually occurs during a lengthy process of gathering information from unemployment insurance filings. And it would help explain why tax revenue surged so unexpectedly this spring and why consumer spending has held steady even as the cooling housing market has slowed the nation's economic growth.
The employers that added jobs last month included doctor's offices, hospital, insurers, lenders, restaurants and businesses that needed accountants and managers.
Employment related to housing has flattened, according to the Economic Policy Institute, which focuses on labor issues. Last year, housing-related industries -- construction, real estate and lending -- added 321,000 jobs, according to the institute's calculations. This year, they've added 6,000.
Another sign of potential weakness is the continuing decline in temporary service agency jobs, which have fallen by 36,000 since December. Employers tend to add temps as the economy gains momentum, waiting to see if the growth continues before adding permanent employees. Conversely, during a slowdown, "when layoffs may become necessary, the contract or temp workers are the first out the door," said Ray Stone, of Stone & McCarthy Research Associates.
Staff writer Michael Abramowitz contributed to this report.