Archives - Business: Page 26
Author: paul carson (Tue Oct 24, 2006 4:35 pm)
Title: The Economic Situation
For American workers, the job market is starting to look a lot less inviting.
At a career center in Brooklyn, job seekers checked computerized listings on Thursday. Unemployment slipped to 4.6 percent in September.
The Labor Department reported yesterday that employment grew by just 51,000 jobs in September, adding slack job growth to the emerging tableau of an economy gradually slowed by higher interest rates, expensive energy and a sputtering housing sector.
In the last three years, the American economy has added about six million jobs. Unemployment, which dipped to 4.6 percent last month, has fallen to the lowest point since early 2001. And in recent months, the wages of ordinary workers have finally started to increase enough to slightly outpace inflation.
But the new government data, said Joseph LaVorgna, chief United States economist at Deutsche Bank, suggests that “the best news on job creation is behind us.”
The payroll growth recorded in September culled from a survey of some 300,000 businesses that is seasonally adjusted in an effort to factor out normal variations was the weakest since October of last year. And even though job growth for the previous two months was revised up significantly, it now appears that payroll growth has decelerated sharply.
From March 2005 through March 2006, according to new information from the Labor Department, job growth averaged 236,000 a month. For the last three months, it has averaged just 121,000.
Analysts said the downshift puts the Federal Reserve and its chairman, Ben S. Bernanke, in a good position to keep interest rates steady.
“The slowdown the Fed wants to engineer is clearly in the data,” said Robert J. Barbera, chief economist of ITG Hoenig. “This is just what the doctor ordered if the doctor is Ben Bernanke.”
Still, the job market may not be quite as weak as the monthly number suggested. Not only did unemployment based on a separate survey of households that showed more robust employment gains fall slightly to 4.6 percent from 4.7 percent in August, but paychecks also recorded some of their biggest gains so far this year.
Hourly wages for regular workers, excluding managers, rose 4 percent in September compared with a year earlier. This was the same as in August but higher than any other month since June 2001 when workers were still benefiting from inertial wage gains coming out of the Internet-fueled economy of the late 1990’s.
The mixed signals left financial markets divided, with the bond market falling while stocks mostly treaded water.
Contributing to the confusion was an unusually large annual revision of payrolls, with the Labor Department now saying that it had undercounted employment growth by 810,000 jobs from March 2005 to March 2006.
In surveying employers in September, though, the government found that most were being much more cautious than earlier in the year.
Health care providers added 24,000 jobs. Hotels and restaurants increased employment by 19,000. Manufacturers cut 19,000 jobs in September; retailers shed 12,000.
And while construction companies unexpectedly added 8,000 jobs, experts do not think they will be hiring much in the future, and many may soon be shedding workers.
“It’s going to be a teeter-totter,” said Kenneth Simonson, chief economist of the Associated General Contractors of America. “I would expect construction growth over the next 12 months to be minimal, perhaps less than 1 percent.”
Over all, the index of total hours worked in the private sector, the broadest measure of demand for labor, declined from 105.1 to 105.0 in September. But some economists, looking at other evidence like healthy consumer spending and the recent decline in gasoline prices, predicted that the current slowdown in employment will not last.
“If you were a lawyer, you would have no problem prosecuting this for reasonable doubt,” said John Ryding, chief United States economist at Bear Stearns. “I would prosecute that any day.”
He added that he expected the tight job market to put further pressure on the Fed to raise interest rates again soon.
President Bush pointed to the decline in unemployment as evidence that his economic policies are working, urging Congress to extend his tax cuts beyond their planned expiration at the end of the decade.
“Today we got more good news,” President Bush said in a speech at a Federal Express operation in Washington. “I’m pleased with the economic progress we’re making.”
Still, most economists see a slowing economy taking its toll on hiring, with many now predicting that the Fed’s next interest rate movement will be down, as it moves next year to try to revive growth.
“The Fed now has less justification to raise interest rates in the future,” said Anthony Chan, chief economist at J. P. Morgan Private Client Services.
Mr. Bernanke, in a speech in New York on Wednesday, said that he also foresaw slower growth. He predicted that the falloff in the housing market would shave output in the second half of the year by about one percentage point.
By and large, economists are not uncomfortable with the gradual deceleration of economic growth recorded to far. “The trend doesn’t appear to be that alarming at all,” Mr. Chan said.
But the changing condition of the labor market may not be so benign for workers. “The data is consistent with stable to modestly rising unemployment,” Mr. Barbera said. “Roughly 4.5 percent unemployment is as tight as it’s going to get. I see no obvious additional increases in workers’ bargaining power.”
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grow and be kind
This article appears to follow the path of the economic statistics it’s reporting on. One minute it's down, stating that the economy is sluggish and unemployment has "slipped" to 4.6% (a number that all economists will tell you is normal and expected). Then it changes pace and claims that the Bureau of Labor Statistics undercounted job growth by 3/4 of a million jobs from 2005- 2006, and workers will likely feel dismay over the current economic conditions. Also, the "seasonally adjusted" payroll growth statistics proved to be the "weakest since October of last year". Wait a minute, what's the date? Oh yes, it's October right now. So that would mean, a seasonally adjusted statistic showed a normal trend of decline in the late months of each year when using the last two years as supporting data. When the historical data is viewed, no clear pattern emerges. In fact, even when the economy was booming during the 1990's, certain months registered a negative number for payroll growth. This statistic shows a tendency to fluctuate frequently and often, without any economic effect.
The hires rate is currently 3.5%, which is a fairly solid number considering the range for the hires rate is 3.0-3.8 for the last 5 years. What about job openings? The official preliminary number for job openings is 4,145,000. How does that compare to recent historical data? It's the highest since pre- 9/11 statistics. Finally we come to the unemployment rate, which was correctly stated as 4.6%. It is a commonly accepted rule of thumb, that any unemployment rate below 5% is normal, and not cause for alarm. This is especially true since the unemployment rate peaked at 6.3% in June 2003. Since then, the rate has decreased at a slow, but relatively steady pace. We were inside the normal range in June of 2005, stepped back out of it for one month, and it's been smooth sailing ever since. We could view other statistics, but the truth is obvious. The numbers all show the strongest numbers coming out of the dotcom boom in the late 90's, falling to their weakest after September 11th, and a steady strengthening since that time. The economy is a little sluggish as a result of the rising interest rates by the Fed, which is expected and welcomed. With news that the Fed will likely hold rates steady, or even decrease them in the future, the economy looks great. If Ben Bernanke is happy with the numbers, what does that tell you? He is the head economist in the United States, whose job consists of regulating- you guessed it- the economy. If he’s happy, so am I.
Doesn't it seem ironic that the once struggling economy instantly turns around and reaches record highs just weeks before the mid term elections?
It wasn't a sudden turn of statistcis. The recent economic trends have been steady since mid 2002. A look at the Labor Statistics shows a definitive U shape in nearly all graphs. Higher numbers in the 1990's, lower around 2001-2, and now finally rising numbers.