Hiring, Wages Increase Modestly
Housing-Credit Fallout Appears To Be Confined

By Neil Irwin
Washington Post Staff Writer
Saturday, December 8, 2007

Companies created jobs at a moderate pace in November, the government said yesterday, suggesting that the labor market has not suffered excessively from the housing and financial market crises.

U.S. employers added 94,000 jobs to their payrolls last month, the Labor Department said, and the unemployment rate was unchanged at 4.7 percent. That is hardly a blockbuster pace of job growth -- it takes about 125,000 new jobs a month just to keep up with population growth -- but it was strong enough to give economists confidence that consumer spending will not decline because people are out of work.

Investors, based on trading in futures markets, predict that the Federal Reserve policymakers will cut a key short-term interest rate at their meeting on Tuesday. Yesterday's jobs data did nothing to undermine that expectation. The modest job growth level was in line with economists' expectations and consistent with Fed leaders' view that the economy is growing, but at risk of slowing next year.

"We're muddling along," said Kurt Karl, chief U.S. economist at Swiss Re, a reinsurer in Zurich. The November job growth, he said, was not strong enough to suggest the economy is in great shape, but not so weak as to make a recession seem more likely.

The job market outlook is particularly crucial right now. As housing prices decline in much of the country and credit tightens, economists are counting on people keeping their jobs -- and steady incomes -- to keep the U.S. economy from falling into recession.

"Continued good performance by the labor market is important for maintaining the economic expansion, as growth in earnings helps to underpin household spending," Fed Chairman Ben S. Bernanke said in a speech last week.

The retail industry added 24,200 jobs in November, among the leading sectors. The numbers are adjusted for seasonal ups and downs, which means holiday hiring was stronger than usual, a hint that retailers feel confident about their prospects.

Other bright spots included the hotel and restaurant sector, which added 27,800 jobs; the health-care sector, which added 14,900 positions; and state and local government, which created 29,000 jobs. Professional and business services companies added 30,000 positions.

"The services industry continues to do well," said Roy Krause, chief executive of Spherion, a large employment services company in Fort Lauderdale, Fla. As for the overall economic outlook, he said, "Everybody's got a little concern, but we still have a lot more jobs than we have people for."

In other promising news for the economy, the average weekly wage for non-managerial workers rose $2.70, to $595.89, and is up 3.8 percent for the past year.

The lagging sectors were predictable and appeared tied to the housing downturn that has accelerated in recent months. Residential-construction-related jobs fell by 20,000. The number of construction jobs is down by 121,000 in the past year, a smaller drop than economists expected.

Widespread layoffs among mortgage providers appear to be taking a toll, too. The number of jobs in credit intermediation, a category that includes banks and other financial institutions, fell by 13,000.

Manufacturing continued to bleed jobs, even though exports have been rising. It shed another 11,000 positions and has lost 183,000 jobs in the past year. Part of the problem is that much U.S. manufacturing is tied to construction. For example, manufacturers of wood products cut 7,700 jobs in November, probably because of lower demand for lumber for housing.

Still, the new data make it look like damage to the job market from the housing downturn is relatively contained to sectors directly affected -- and that other employers are confident enough to keep adding to their payrolls.

"If consumer spending comes way down or we have a poor Christmas, we may see some different results," Krause said, "but right now employers are still hiring even permanent people. That tells me their order pipeline for the next few months must be reasonably positive."