July 2, 1999
Labor market shows no sign of overheating
Labor market data released today by the Bureau of Labor Statistics show the unemployment rate edging up slightly in June to 4.3%. Job growth of 268,000 was above average, but, in light of May’s decline, the overall job growth over the last quarter has been modest. Wage growth also continues at a modest rate.
The volatility of job growth in recent months suggests the need for caution in interpreting trends in this area. There was no job growth in May and little growth in March (83,000) yet fast job growth in February and April. This bumpy ride has translated into a job growth average of about 195,000 jobs per month over the last three months, which is slightly down from the 209,000 jobs a month over the first quarter and 275,000 a month over the last quarter of 1998. If there is a trend, then it is that job growth is modest and perhaps even slowing a bit.
The household survey data also suggests a simmering, but not overheated, job market. Although unemployment grew by 180,000, pushing the unemployment rate up a notch to 4.3%, employment growth was only modest. An increase in the adult labor force participation rate of both men and women fueled a large labor force growth of 389,000 and helped reverse this area’s weaker growth in recent months. The fall in unemployment among new entrants to the labor market suggests that these workers are readily finding jobs.
The growth in hourly earnings over the last three months has been 3.7%, slightly less than the 4.1% growth over the first quarter. Another sign of wage moderation is that wages in the service-producing sector, where all of the job growth has been located, have also grown at the average pace of 3.7% over the last year.
Manufacturing employment continues to slide downward, losing 35,000 jobs in June; this is the same pace of job loss as over the last six months. Since March 1998, manufacturing has lost roughly 500,000 jobs. This includes large job losses in textile and apparel (100,000), industrial machinery (100,000), and electronics (70,000). The rising trade deficit, therefore, appears to have a steady dampening effect on manufacturing jobs and growth.
The benefits of persistent low unemployment are reflected in many labor market indicators. Multiple job holding, for instance, has fallen over the last year from 5.8% to 5.6% among men and from 5.9% to 5.5% among women. This is the result of fewer workers having a part-time job in addition to their full-time job, and fewer workers holding two part-time jobs. There has also been a decline in the growth of part-time work, reflecting fewer workers stuck in part-time jobs who want full-time jobs. Plus, only 47,000 new voluntary part-time jobs were added to the economy in the last year. These trends suggest that fewer people are needing second jobs, and more workers are able to get full-time jobs rather than working one or two part-time jobs involuntarily.
One of the wild cards in the current labor market is whether the pace of labor force growth will match the increasing demand of employers for new workers. The number of people not in the labor force (i.e., those that did not look for work or have a job last month) but who have looked for work in the last year is now at about 1.2 million, the same level as a year ago. This suggests no exhaustion of possible new workers. The decline in unemployment among new entrants, however, suggests strong employer demand and the ready ability to find work. But these data are very volatile – they depend on factors such as the ending of school years and the timing of when graduates decide to seek work. These will be the indicators to watch in coming months.
The Economic Policy Institute JOBS PICTURE is published each month upon release of the Bureau of Labor Statistics’ employment report.