Economic scene: Reasons to fret despite a spurt of jobs in the U.S.
By: Administrative Account | Source: New York Times
November 10, 2003 11:50AM EST
Edmund L. Andrews NYT
Monday, November 10, 2003
But after the government announced on Friday that the country added about 126,000 jobs in October, Snow had reason to feel at least partly vindicated. "I'm not in the business of making estimates," he said. "But I do feel that with the continuing strong recovery we're going to see jobs pick up in the coming months."
It is far too early for Snow to declare victory. Even though economic growth surged at a 7.2 percent annual rate in the third quarter of this year, business executives around the country say they are still cautious about expanding their work forces and building factories.
A new economic study prepared for the U.S. Conference of Mayors concludes that wages are significantly lower in the service sectors that are adding jobs than the wages in manufacturing industries that have been losing jobs.
According to the study, prepared by the economic consulting firm Global Insight, the biggest job growth over the next two years will be in administration and support services, health care, travel and tourism. The average wage in those sectors over the next two years is expected to be $36,000, it said. By contrast, the average wage in manufacturing sectors that lost jobs is about $43,000.
"While you see jobs coming back, they are not coming back in the same sectors," said Kwame Kilpatrick, the mayor of Detroit. "Cities like Detroit have to struggle to find their niche."
The jump in employment last month was more than twice what most economists had predicted, and it came on top of new data showing that job growth in September was twice as high as the government estimated one month ago.
The upshot: After losing about 2.8 million jobs since early 2001, most of them in manufacturing, the United States has added nearly 250,000 over the past two months. Given the natural growth of the U.S. work force, the economy needs to add about 150,000 jobs a month before unemployment will drop much below its current level of 6 percent.
Still, the numbers could be very good news for President George W. Bush, whose biggest obstacle to re-election next November has been his track record on jobs. But the level of job growth seen in October might prove difficult to sustain. Corporate executives, though optimistic about the prospect of rising sales and profits, are still trying to squeeze extra output from increased productivity rather than adding workers.
Union Pacific is preparing for a year of strong growth. But although the big freight rail company is hiring, it expects productivity gains to allow its overall work force to remain at roughly its current size of 46,300 people.
"We're going to handle more business with fewer people," said Jim Young, chief financial officer.
In its regular survey last month of chief executives at large companies, the Business Roundtable found that 71 percent of executives expected their sales to increase in 2004 but only 12 percent expected to expand their work forces.
"Productivity continues to astonish everybody," said Henry McKinnell, chief executive of the drugmaker Pfizer. While executives are far more optimistic about next year than they were just a few months ago, he said, their mood is still "not ebullient."
In themselves, the new job numbers are not that impressive. By comparison with the rebound in jobs after other recessions, including the so-called jobless recovery of 1991, the pace of job creation remains anemic.
In a speech Thursday, one day before the Labor Department released the October employment data, a Federal Reserve governor, Ben Bernanke, took pains to emphasize that the labor market remained weak.
After an extensive review of all the possible reasons for the sluggish labor market, Bernanke said he was convinced that the biggest single cause has been the stunning growth in productivity - the amount of goods or services produced per worker.
Indeed, the government reported Thursday that productivity shot up at a blazing annual rate of 8.1 percent in the third quarter, and that comes after increases of 5 percent since late 2001.
The New York Times
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