- The Washington Times - Friday, April 7, 2006

Unemployment declined to 4.7 percent last month, approaching a five-year low, as the economy churned out 211,000 new jobs — a sign of steady economic growth and good news for cash-strapped consumers.

Nearly all the job gains were in services and professions such as health care, hospitality, retail, architecture and engineering, with manufacturing posting a decline of 5,000 jobs, the Labor Department reported yesterday. Average wage gains fell off slightly to a 3.4 percent pace over last year, but remained near five-year highs.

Many signs have emerged of a strengthening labor market this year. Joblessness is falling among all the main worker groups, from blacks and Hispanics to adult white men and women, and the number of discouraged workers and people working part-time because they must is dwindling. The number of workers on unemployment rolls is dropping by the week.

“The job market is good, and there is no danger of a sudden end to the economic expansion,” despite a sharp slowdown in the housing market, high energy prices, and threats of bankruptcy in Detroit, said Roger M. Kubarych, an economist with HVB Group.

The stock and bond markets reacted negatively to the job news, worrying that the improving job market will fan wage inflation and prompt the Federal Reserve to keep raising interest rates. The Dow Jones Industrial Average dropped 97 points to 11,120, while the yields on Treasury 10-year bonds shot up to nearly 5 percent.

But Mr. Kubarych said the markets have little to fear that what’s good for workers will be bad for investors. “Despite the low unemployment rate, wage pressures are modest.”

President Bush, whose low ratings in part reflect public perceptions that the economy is not much improved, hailed yesterday’s “evidence of an economic resurgence that is strong, broad and benefiting all Americans.”

While the job gains in recent months have not been large compared with past job booms, they nevertheless have been big enough to absorb new people joining the labor force. In booming sectors of the economy such as construction, energy and health care, shortages of skilled workers such as nurses, engineers and craftsmen have emerged.

“We have solid job growth, but no significant inflationary pressures,” said Bill Cheney, chief economist with John Hancock Financial Services. With the unemployment rate now firmly ensconced below 5 percent and headed toward the 1990s low of 4 percent, he expects the strengthening market to start drawing workers back from the sidelines where many apparently have been waiting until better jobs and wages emerged.

“We’re now creating enough jobs to push labor force participation rates back upward towards pre-recession levels,” he said. “We’re starting to take up some of the slack in the economy,” but at a gradual pace that should not alarm the Fed or the markets, he said.

Richard Yamarone, economist with Argus Research Corp., said the economy appears to have achieved what analysts call “full employment” — a state where nearly every worker who wants a job can get one fairly easily. In such a market, those still unemployed for long periods generally lack the skills or education they need to get what jobs are available.

Because Fed officials have focused frequently on the declining supply of skilled workers, “we can’t possibly see how the central bank will not find concern with this report,” Mr. Yamarone said. “Keep in mind that about 70 percent of all final costs to products and services come from labor.”

Christian E. Weller, senior economist with the Center for American Progress, said the job market has made slow progress since the economy emerged from recession in late 2001, but wages and job growth still remain meager by historical standards.

Job gains averaging a little more than 200,000 in recent months are “respectable,” but “barely average” for the United States, he said.

Far from raising inflation concerns, below-average job growth since 2001 “has actually translated into a slowing of wage growth,” with wages barely keeping pace with inflation in recent years, he said.

The end of the housing boom may create challenges for the job market in coming months, the economists said, as housing construction, real estate finance and related industries had driven the creation of as much as half of all jobs during the boom years.

“It is unclear if there is enough momentum in non-construction-related jobs to dampen the impact of the slowing construction boom,” said Mr. Weller. He noted that industries with job growth last month, such as retail and hospitality, pay relatively low wages ranging around $10 an hour that on average are only half as much as construction and finance wages.

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