- The Washington Times - Friday, March 10, 2006

Wages rose by the most since 2001 and jobs posted solid gains last month, offering some relief for financially strapped consumers faced with climbing costs for energy, housing and other needs.

The Labor Department yesterday reported a 243,000 increase in jobs in a wide range of professions from health care and construction to finance and education — the latest in a string of gains since November that have drawn the unemployment rate down sharply to 4.8 percent.

The growth in jobs last month was so strong it enticed 335,000 new job seekers into the market, causing the jobless rate to tick up from 4.7 percent — the 41/2-year low reached in January.

“The economy is generating plenty of jobs — that’s good news,” said Bernard Baumohl, executive director of the Economic Outlook Group, noting that last month was one of the best months for jobs since 2004.

The 3.5 percent gain in average wages over the past year is particularly welcome for overstretched consumers who have maxed out on debt and are nearing the end of their rope coping with higher costs for essential items.

But, unfortunately, Mr. Baumohl said, the wage increase was just enough to cover inflation, leaving workers with no real increase in purchasing power.

“This certainly should not be construed as a breakout in wages,” he said.

President Bush trumpeted the job news, which pointed to robust economic growth in the first quarter and helped send the Dow Jones Industrial Average up 104 points to 11,076.

“American workers are defying the pessimists,” Mr. Bush declared. “Our economy is strong.”

The report was the latest to suggest a substantial strengthening in the job market that is giving workers some bargaining power for higher wages and a wider selection of jobs than seen since the 1990s.

Another report out earlier this week showed a surge in labor costs and an unusual drop in productivity during the fourth quarter as employers added new staff rather than wring out more efficiencies from their existing staff to take on new business.

Roger M. Kubarych, economist at HVB Group, said the job report shows the economy is rebounding moderately from a sharp slowdown last fall after two Gulf Coast hurricanes drove up unemployment and sent energy prices soaring to record levels.

But he said he expects job growth to start tapering off again, this time because a principle engine behind job and economic growth in recent years — the housing boom — is ending.

“HVB research suggests as much as a third of payroll growth in recent years has been directly or indirectly related to housing activity — not just home building, but also the sale, renovation and furnishing of existing homes,” he said.

The end of the housing bonanza will take an important prop out from under consumers, who have financed much of their spending recently by taking out loans that tap into their rapidly rising home equity, he said. Consumers will have to start saving more and consuming less, he said.

Christian E. Weller, senior economist with the Center for American Progress, said that while recent job gains have been good, employment growth so far in the 2000 business cycle has been subpar — causing millions of Americans to drop out of the labor force because they’re discouraged about finding jobs.

“Today’s figures show that there is still a lot of labor market slack,” he said. The ample room for improvement is important, he added, because it means inflation is not likely to be ignited anytime soon by an unwarranted surge in wage growth.

Richard Yamarone, economist with Argus Research Corp., said the Federal Reserve nevertheless is likely to see the job news as a reason to raise interest rates further. The central bank has cited the falling unemployment rate as a sign of constraints on labor supply that raise inflationary pressures.

“The Fed will not take kindly to this report,” he said. “All the labor market indicators are signaling strength.”

Copyright © 2019 The Washington Times, LLC. Click here for reprint permission.

The Washington Times Comment Policy

The Washington Times welcomes your comments on Spot.im, our third-party provider. Please read our Comment Policy before commenting.


Click to Read More and View Comments

Click to Hide