- The Washington Times - Friday, April 6, 2007

The unemployment rate fell to a five-year low of 4.4 percent as job growth picked up to 180,000 last month — a show of strength that bolstered hopes that the economy will endure the turmoil in the housing and mortgage markets without major harm.

The March increase in jobs reported by the Labor Department reflected a revival of hiring among construction companies, department stores and retailers as well as continued robust growth of health care jobs. The construction job gains erased a big loss in February resulting from cold weather and left jobs in the sector roughly unchanged since September with increases in hiring for office and government construction projects offsetting losses in housing construction.

In another sign of unexpected strength, hiring in January and February was 32,000 more than previously reported. But the overall employment gains in March masked the loss of another 16,000 manufacturing jobs — the ninth straight month of shed factory jobs — as well as a rare cut in business services jobs for accountants and temporary employees.

“The latest job numbers show an economy that is effectively absorbing the blows from the residential and mortgage sectors,” said Bernard Baumohl, managing director of the Economic Outlook Group, an economic advisory firm in Princeton Junction, N.J.

Job growth averaged a “respectable” 152,000 a month in the first quarter, which is down from last year’s 188,500 pace but consistent with the more subdued growth of the economy, he said.

Wages continued to grow moderately, bringing the yearly gain for average hourly workers to 4 percent. Both the wage gains and the unemployment rate are at levels attained at the end of the last expansion in 2001, signaling that the job market remains fairly tight despite a slackening of economic growth since last spring.

“The economic outlook is quite bright, and the probability of recession is still negligible” as long as consumers continue to gain jobs and income, Mr. Baumohl said.

The report suggests the Federal Reserve has achieved its goal of a “Goldilocks” economy where growth is “not too hot, not too cold” and will not ignite inflation, he said. It particularly vindicates Fed Chairman Ben S. Bernanke’s view that solid growth in jobs and income will underpin consumers and keep the economy growing despite the troubles in housing and manufacturing.

David Wyss, chief economist with Standard & Poor’s, said the strength in construction and other areas was a “major surprise” and indicates that the slowdown in hiring during January and February was more of an aberration because of cold weather than previously thought. But he cautioned that early retail hiring for Easter and other distortions in the department’s seasonal adjustments may have overstated the job gains.

“The strength in construction, in particular, is highly encouraging” in light of an 18 percent drop in home building and a loss of 134,000 home construction jobs in the last year, he said. “However, the seasonal factors swing very sharply between February and March, and exact numbers need to be taken with a larger grain of salt than usual. The [March] job gain was 939,000 on a nonseasonally adjusted basis, which is nearly half the 1,984,000 gain over the last year.”

Lawrence Kudlow of Kudlow & Co. called the jobs report a “blockbuster” that “puts the lie to those perma-bear pessimists who keep predicting recession from the subprime mortgage problem and the housing slowdown.”

The report vindicates optimistic investors who have driven stocks to near record highs in the past year, he said.

“The rate of economic growth ebbs and flows over long expansion periods such as this one,” which is in its sixth year of growth, he said. “In the absence of major policy blunders” like big tax increases, the unleashing of inflation and protectionist forces or overregulation, “the economic pie keeps expanding,” he said.

Peter Morici, business professor at the University of Maryland, said the job boomlet has been better for college-educated and skilled people than for high school graduates and dropouts, though all groups have seen their unemployment rates drop in the past year.

“For high school graduates without specialized skills or training, jobs offering good pay and benefits remain tough to find,” he said. “Historically, manufacturing and construction offered workers with only a high school education the best pay, benefits and opportunities for skill attainment and advancement. Troubles in these industries push ordinary workers into retailing, hospitality and other industries where pay often lags.”


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