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Economy shakes off winter lull
Question of the Day
The economy resumed healthy growth during the spring after a winter lull, an employment report confirmed yesterday, with 132,000 jobs gained last month and a nearly 4 percent rise in wages seen over the past 12 months.
Most of the new jobs were in services such as education, government, health care and restaurants, while manufacturing and retailing posted further large declines of 18,000 and 24,000 jobs apiece, the Labor Department report showed. Employment in construction ticked up by 12,000 despite the housing recession thanks to strong public and commercial building projects.
The job growth was enough to keep the 4.5 percent unemployment rate from rising, but not so much as to draw it down further. Adding to the upbeat tone of the report, job growth in April and May was substantially higher than previously reported at 122,000 and 190,000 respectively.
Stocks rallied on the news, with the Dow Jones Industrial Average gaining 46 points. Interest rates jumped in the bond market, however, as the report signaled stronger growth and inflation ahead. Scattered shortages of skilled workers helped stoke the solid rise in wages and hours and, along with surging oil prices nearing record levels in London, stoked worries that price pressures are heating up.
"You've got good wage gains combined with good employment gains," said John Silvia, chief economist at Wachovia Corp, noting "that's good for the consumer." But he added that there are really two job markets — one for service professionals like doctors and accountants that is booming, and a weakening market in manufacturing and construction where jobs are disappearing.
Shortages of skilled and educated workers in the service professions are sending wage and benefits levels soaring, he said, while wages elsewhere are depressed by the decline in jobs and a surplus of workers available.
Christian E. Weller, an economist with the Center for American Progress, a progressive think tank, questioned the widespread perception on Wall Street that the job market and the economy are "strong." He noted that average job growth this year at 145,200 a month is down more than 40,000 from last year, has fallen by two-thirds from 1990s levels, and is barely enough to keep up with the growth in the population.
"Job gains are far from robust," he said, and average wages have not budged from the 4 percent level in the last year despite inflation that is running at around 3 percent.
"Because of weak job growth, workers do not have the bargaining power to keep wage growth at least in line with price changes," he said.
Peter Morici, business professor at the University of Maryland, said that the unemployment rate has stayed low mostly because people are dropping out of the work force. If Americans were participating in the labor force at the rates they did in 2000, the unemployment rate would be closer to 6 percent, he said.
"The economy is adding lots of jobs for college graduates, especially those with technical specialties in finance, health care, education and engineering," he said. "However, for high school graduates without specialized skills or training, jobs offering good pay and benefits remain tough to find. For those workers, who compose about half the working population, the quality of jobs continues to spiral downward."
The loss of nearly 2 million manufacturing jobs since 2001 is the result of a "chronic trade deficit that shifts workers from higher valued jobs in manufacturing and exportable services into lower valued services that do not compete in trade, such as the restaurant and lodging industries," he said. "Overall, it is responsible for the poor job market faced by many workers without a college education or specialized skills."
Mr. Morici said the combination of moderate job and wage growth is good for the stock market even if it doesn't boost ordinary workers. "With U.S. companies earning large profits abroad and private equity buyouts driving up demand and unlocking value for U.S. stocks ... the bull market will continue, and the Dow should breach 14,000 before the end of 2008."
By Mark Davis
The nation founders, the Lone Star State thrives
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