- The Washington Times - Friday, October 6, 2006

The nation’s unemployment rate fell to 4.6 percent last month, down from 4.7 in August, and average wages rose by 4 percent over the previous year — the best performance for both measures in five years.

The monthly Labor Department report released yesterday revealed that 51,000 new jobs were reported last month, a disappointing figure, but job gains were stronger than reported earlier for the previous year and a half.

“The economy is actually stronger than these employment numbers suggest,” said Bernard Baumohl, executive director of the Economic Outlook Group, a Princeton, N.J., economic-advisory firm. The figures were mixed and elicited widely varying reactions from financial markets and analysts.

The stock market declined after focusing on the weakness in job growth, which was the lowest new-jobs figure since Hurricane Katrina blew a hole in the economy last year, and included sizable job losses in manufacturing and retail trade as factories and stores continued to retrench.

A revision in the number of jobs created in August, to 188,000, and a huge revision adding 810,000 to the number of jobs created between March 2005 and March 2006 sparked fears of inflation in the bond market and suggested an underlying strength in the labor market that is unlikely to dissipate anytime soon.

“At the very least, this shows the soft landing is still on course,” Mr. Baumohl said. “There is little to suggest that we are on the precipice of a recession.”

Roger M. Kubarych, economist at HVB Group, said the report was “mixed,” but the downtrend in job growth is likely to continue this fall and raise further concerns about economic weakness.

“Announced job cuts in the motor vehicles and computer industry will be taking effect in the next few months, so payroll gains will likely subside further,” he said. Since workers laid off in those industries tend to be highly paid, their job losses “may temper wage increases” later this year, he said.

Dean Baker, economist with the Center for Economic and Policy Research, said that while the report showed some hidden strengths, the continued addition of jobs in housing-related construction and finance seems unlikely to continue, given the big drops in home sales and mortgage financings in the last year.

“With housing data showing a sharp downturn, it is implausible that employment in the sector will not soon be affected,” he said. “Given that employment elsewhere is already weak, when the downturn in the housing-related sectors begins to show up, the prospects for employment will be bleak.”

Embattled House Speaker J. Dennis Hastert sought to highlight the good news as he and other Republican leaders struggle to maintain their majority in Congress.

“September’s lower unemployment rate, steady job growth and increased hourly earnings comes on the heels of a record-setting week on Wall Street,” the Illinois Republican noted.

Peter Morici, a former chief economist at the International Trade Commission, said the Federal Reserve should be pleased with the soft growth shown in the report.

“Subpar jobs-and-wage growth indicates the economy is slowing significantly and underperforming its potential. In the months ahead, loosening labor-market conditions will put a lid on wages and help contain inflation,” he said. “Along with lower gasoline and natural-gas prices, modest wage pressures will keep prices in check and the Federal Reserve will have no cause to raise interest rates.”

For workers, the picture is decidedly mixed, Mr. Morici said. Those with more education and skills in professions like health care, finance and information technology have little trouble finding jobs, while those with only a high school education face higher unemployment rates around 6 percent.

Displaced manufacturing workers are having a particularly difficult time, as factories continue to shed jobs despite growth in exports and big-ticket capital goods.

“Had the current economic expansion followed the pattern of past recoveries, 2 million manufacturing jobs would have been regained” instead of lost, he said. The layoffs in manufacturing have been concentrated in the Rust Belt and are having an impact on the upcoming elections.

“Much of the stress in the jobs market falls in contested congressional districts in western Pennsylvania, New York and the lower Midwest,” he said. “This combination of economics and geography explains why Republicans are in danger of losing control of the House of Representatives.”

LOAD COMMENTS ()

 

Click to Read More

Click to Hide