- The Washington Times - Friday, November 5, 2004

Job growth exploded by 337,000 last month as a result of rebuilding from the hurricanes and pent-up demand for workers in nearly every field from teachers to architects.

The job surge reported by the Labor Department yesterday suggests the economy may be snapping back to healthy growth after a lull in the spring and early summer.

The burst of new jobs, including an additional 113,000 not previously reported in August and September, apparently enticed about 367,000 idled workers back into the labor force last month to seek jobs, thus causing an uptick in the unemployment tally to 5.5 percent.

“The labor market may finally be gaining some traction,” said Oscar Gonzalez, economist with John Hancock Financial Services.

Stocks rallied on the prospect of healthier growth, with the Dow Jones Industrial Average gaining 73 points to 10,388.

The Dow has been up in eight of the last nine sessions, and gained 3.6 percent this week, its best weekly performance since March 25, 2003.

“Jobs are the linchpin of economic growth and consumer confidence,” Mr. Gonzalez said. “While we still have plenty of lost jobs to make up, this report is bound to boost spirits and hopefully spending as we head into the holiday season.”

The department said a 71,000 jump in construction jobs appeared to be mostly the result of cleanup and rebuilding efforts after four hurricanes hit the Southeast in late summer — an effort not likely to be repeated in the months ahead.

Manufacturing employment actually shrank for a second month, with the loss of 5,000 jobs. And 49,000 of the jobs created in services were temporary, most likely coming without health care and other benefits.

But the department reported robust job growth in some high-wage professions, including 8,000 in architecture and engineering, 62,000 in education and health care, 17,000 in securities, commodities and finance, and 54,000 in specialty trades.

The growth in high-paying jobs helped to boost average wage growth to 2.6 percent over the past year from roughly 2 percent at the beginning of the year.

Michael Alter, president of SurePayroll, which provides payroll services to small business, said the long drought in income growth seems to be ending.

While jobs have been growing in most areas in the past year, the average size of a worker’s paycheck was shrinking until only recently, he said.

In Virginia, for example, the number of employees on company payrolls has increased by 11.4 percent so far this year, but the average paycheck is down by 9 percent, while in Maryland, both the work force and paychecks are declining, he said.

Nationally, average paychecks have shrunk by 3.4 percent this year while jobs have increased by 3.2 percent, according to the payroll firm’s calculations. But that may be changing, Mr. Alter said.

“In the last couple months, there’s evidence that salary declines may be flattening out or reversing in some areas,” he said.

More jobs and incomes will give consumers greater wherewithal to increase spending in the months ahead without having to rely so much on credit, as they have been.

Richard Yamarone, economist with Argus Research Group, said last month’s “torrid” job growth probably is not sustainable, but jobs should continue to grow by an average of 125,000 to 150,000 a month.

“We are convinced that the surge in job creation was predominantly a function of the return of lost positions due to the hurricanes that plagued most of the Southeast during August and September,” he said.

“The underlying growth rate of the economy, currently in the vicinity of 3 percent to 3.5 percent, isn’t strong enough to engender this pace of payroll job creation in the fourth and first quarters,” he said.

Consumer confidence has declined in recent months amid a noticeable pickup in layoff announcements by some major corporations, he said, while few companies have announced big hiring plans.

“Many businesses have decided that the skyrocketing cost of health care and medical benefits are simply too much to handle and have decided to eliminate positions,” he said. “Those companies that absolutely couldn’t do without new workers probably went to the temporary help services providers.”

John Engler, president of the National Association of Manufacturers, blamed the loss of manufacturing jobs — which had been growing strongly earlier in the year — on growing health care and energy prices, among other costs of doing business.

“The external costs associated with taxes, health care, litigation, regulation and soaring energy prices add 22.4 percent to the cost of labor in this country,” he said.

“High costs of production at home, plus unprecedented global competition, are forcing more and more manufacturers to adopt advanced technology” or move overseas, he said.

The continued outsourcing of jobs also is because of a “serious educational gap” between the United States and foreign competitors, Mr. Engler said.

“As our industries become more high-tech, they are finding it increasingly difficult to find qualified labor,” he said. “Our schools are not equipping young people with the science, math, computer and communication skills they need to work in modern manufacturing.”

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