December 5, 1998
Jump in November Sent Work Force to a Record High
Report on Jobs Helps to Stabilize Stock Market Boeing Plan for Job Cutbacks Is Bitter Pill for Seattle Area (Dec. 3) Growth in Jobs Slowed Sharply Last Month (Nov. 6) Wages Turn Hot for Workers, With Gain of 1.2% (Oct. 30)
The Labor Picture in November: Unemployment The Labor Picture in November: Employment
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By SYLVIA NASAR
espite a fresh wave of corporate downsizing announcements, the government reported Friday that more Americans are working than ever and that the overall economy continued to create jobs at a robust clip.
While corporate giants from Boeing to Johnson & Johnson are planning to lay off tens of thousands of employees because of various business difficulties, American employers expanded their payrolls by an estimated 267,000 workers in November alone, the Labor Department reported. Unemployment fell from 4.6 percent to 4.4 percent, coming close to the lowest jobless rate in the past three decades.
The gain in jobs was the largest in three months and matches the strong pace of the first half of the year. Moreover, the economy created more new jobs in September and October than had been previously reported.
The New York Times
Manufacturers’ total new orders, in billions of dollars, seasonally adjusted.
Source: Commerce Department
"However many jobs were lost in November, even more were created," said Thomas Nardone, who is in charge of gathering employment figures at the Bureau of Labor Statistics.
A record 64.1 percent of all Americans of working age now have jobs. And even though about 250,000 well-paying manufacturing jobs have been lost this year, on average American workers are earning 3.7 percent more than a year ago, a strong increase at a time when inflation has nearly vanished.
Despite the tightest labor market in decades -- the unemployment rate has been below 5 percent for nearly a year and a half -- there is little evidence that rising wages are starting to push up prices.
While economic turmoil swirls outside the United States, workers between the ages of 35 to 54 -- the breadwinners of millions of American families -- are enjoying the same low unemployment rate, 3 percent, as in the best of the Eisenhower years.
The strong labor market suggests that the economy, while expected to slow from the current brisk pace, has plenty of momentum to keep expanding into next year. Wall Street cheered the job gains, seeing hints that company profits may improve next year, and sent the stock market higher.
The Dow Jones industrial average rose 136.46 points, or 1.5 percent, to 9,016.14. The bond market, which often fears that a robust economy threatens to lift inflation, took the unexpectedly strong Labor Department report largely in stride, pushing up long-term interest rates only slightly.
The report appeared to dash any lingering hopes that the Federal Reserve might reduce interest rates again when it meets later this month for its final monetary policy session of the year.
So far this year, the economy has been growing at a 3.7 percent annual rate and adding an average of 226,000 jobs a month. The economy entered its 91st month of uninterrupted growth in December, meaning that the current expansion will soon go on record as even longer than the 92-month period of growth in the 1980s and could even surpass the record 1960s expansion if growth continues for another year.
All is not rosy by any means. American manufacturers are struggling and factory workers are getting the ax in large numbers. Manufacturers shed 47,000 jobs last month after eliminating 61,000 in October. But a roughly equal number of construction jobs were added and the service sector continued to race ahead.
"There's a spending and construction boom and a production bust," said Robert Barbera, chief economist at Hoenig & Co.
John Challenger, the chairman of Challenger, Gray and Christmas, a consulting firm, contends that the rash of recent layoff announcements represents a new surge. But Friday's job report shows that the number of people who became unemployed because they lost an existing job has remained roughly constant for the past year. The level was 1.9 million in November.
How can the total number of jobs grow when so many people appear to be losing theirs? The answer lies in the process of constant job destruction and job creation that the economist Joseph Schumpeter termed "creative destruction" as long ago as 1942.
Even a large number of layoff announcements that are expected to exceed 600,000 this year pales in an economy that has added more than 19 million jobs this decade and currently employs about 132 million people.
In fact, numbers based on newspaper reports grossly understate the amount of job destruction.
"Big layoff stories are the tip of the iceberg," said Steven Davis, a labor economist at the University of Chicago's business school. Roughly one job in 10 disappears in a typical year, research by Davis and others shows. That means roughly 13 million jobs vanished this year. Yet not only were all those jobs replaced, but several million more were created.
When unemployment is this low, workers to fill new jobs have to come from somewhere else.
"If Boeing lays off 20,000 workers, we need them," said William Dunkelberg, chief economist at the National Federation of Independent Business. Nearly one-third of small businesses surveyed last month reported having trouble filling job openings. "These are not hamburger flipping jobs," Dunkelberg added.
Evidence that he is right comes from the rapid rise in average wages, especially in real, inflation-adjusted terms, for the last few years.
Of course, there is plenty of pain in manufacturing, which employs about 15 percent of the work force. American industry is being battered by a nasty combination of slowing capital investment at home, collapsing export markets abroad and surging imports, all of which depress prices and profits as well as cut into sales. A sharp 1.6 percent drop in factory orders in October portends further pain ahead.
Since last March, manufacturing payrolls have fallen by nearly a quarter of a million jobs as companies cut production and struggle to rein in costs. Not surprisingly, the cutbacks have been steepest in those industries that are most affected by foreign trade, including metal, transportation equipment, capital goods, clothing, textiles and electronics.
While manufacturing is in a slump, the rest of the economy is on a tear.
Retailers, gearing up for holiday sales, did lots of hiring, adding 65,000 more workers than they normally do at this time of year. Over the year, employment in this industry has risen by 457,000.
The boom in housing and a surge in heavy construction projects added 47,000 new jobs as fewer than the usual number of carpenters, electricians and plumbers were laid off. The housing boom also spilled over into the finance industry where most of the 10,000 new jobs were created among mortgage brokerage firms. The insurance and real estate industries added 5,000 and 7,000 positions, respectively.
Over the last 12 months, employment in construction has risen 310,000. "The housing market is going to set its third consecutive record this year," said David Berson, chief economist at Fannie Mae, the nation's biggest buyer of home mortgages.
As it has month after month, the sprawling service sector continued to power the job machine, adding 50,000 new jobs in November, the largest increase since May. Employment in business services rose by 55,000, including 30,000 management and engineering consultants. Private educational services added 15,000 jobs in the month, for a total gain of 54,000 since August. Employment in health services was up 14,000, with the largest increase in doctors' offices and clinics.
With labor markets this tight and job growth this robust, wages are rising briskly, but the pace of increase slowed slightly last month. Hourly earnings rose 3 cents in November, to $12.93.
Still, with workers producing more per hour, those wage gains are being largely offset by greater efficiency, easing the strains on companies that find it difficult, if not impossible, to raise prices.
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