TOPICS > Economy


June 4, 2004 at 12:00 AM EDT


JEFFREY BROWN: It’s been a good spring for the American job machine. According to today’s government figures, May marked the third- straight month in which more than 200,000 jobs were created. To walk us through the numbers I’m joined by Hugh Johnson, chief investment officer at First Albany Corporation. Mr. Johnson, welcome to you. I want to pull apart some of these numbers. What sectors were the strongest?

HUGH JOHNSON: Well, it’s been the same story for a long time now. And if you look just generally at the numbers, it’s really the services sector was the strongest sector in the economy. Manufacturing sector for the fourth straight month added jobs. We had 39,000 jobs added in manufacturing, but as you know, Jeff, the overall longer period of time we’ve seen declines in manufacturing. But most of the jobs created were generally speaking in the services sector. The only surprise, I think, in the services sector is that we had a decline in government employment, whereas when you look at all of the other sort of sub-sectors within services, we saw a rather broad-based increase. So there was nothing that was really standing out. Really services, not manufacturing.

JEFFREY BROWN: What about the geography of job growth? Are there regional differences or this is a national phenomenon?

HUGH JOHNSON: There were regional differences and when you look at longer periods of time it’s very noticeable, so that you see there’s job creation now in the west, but certainly in the south and the southwest. The northeast has been little slow in catching up, but when you take a look at the numbers today it was fairly broad-based and you have to say there was no particular region that jumped out at me as being unusually strong.

JEFFREY BROWN: We’re talking about the quantity of jobs. What about the quality? Because as you know there’s been a lot of concern that as we create jobs they’re not often the high-paying jobs.

HUGH JOHNSON: That’s right. And that’s to some extent that’s certainly true. Manufacturing jobs have been traditionally the higher paying jobs, although that’s not entirely true because you have some subgroups in the services sector that are very high paying. Utilities, for example, information processing, let’s call it technology. Certainly retailers are about half the level of manufacturing. But wholesale trade, which is again in the services sector, is fairly high-paying. But generally you’re absolutely right. We have job growth, but at the same time the job growth is in some of the lower paying sectors of our economy, or let’s say low-to-mid, not necessarily low.

JEFFREY BROWN: Now, the jobless rate held steady, which suggests that people are entering the work force? How does that work?

HUGH JOHNSON: The way that works is it’s simply a function of the number of people entering the labor force, and we’re certainly seeing a goodly number of people entering the labor force, matched by the number they’re getting jobs. As a result of that the unemployment rate itself stays steady. So if you take a look at all of the numbers collectively, if you look at the growth in manufacturing payrolls four months in a row, you have to sort of conclude that’s pretty healthy. Services sector growth, that’s pretty healthy. And the fact that the unemployment rate stayed at 5.6, which is close to the post-war or post-1950 average, you have to say that on balance is fairly healthy. So let’s call it a healthy picture with a little bit of a worry about the quality of jobs, as you referred to.

JEFFREY BROWN: I’m wondering just for context on this 248,000 number, how many jobs does the economy have to create a month to stay ahead of the game?

HUGH JOHNSON: Well, you’re talking about a number… 248,000 is really kind of unusually strong. We were fortunate this month, in other words the number that were entering the labor force was about the same as the number of jobs being created. But to really stay ahead of the game– my estimate, nobody knows for sure– would be about 150,000 to 200,000 jobs. If have you that number on a monthly basis, on average, which is about where we have been this year, then you’ll stay ahead of the game, which is to say that the unemployment rate itself will stay either fairly steady or maybe come down just some.

JEFFREY BROWN: I wanted to ask you about one specific group of the economy. That’s college grads, because this is the season when they’re going off into the labor force, often with big debts. What kind of jobs are they seeing?

HUGH JOHNSON: Well, it’s certainly a lot improved from what we saw last year, so I think I would grade it as pretty good. I think what’s important, particularly if you’re a college grad, is to recognize the shift that we’ve really been referring to in the economy, a shift from sort of a manufacturing engineering economy to a sort of knowledge-driven economy. So where the jobs are opening up are in places like education, health care, the section called information, we’ll calling it technology again. It’s the knowledge driven sectors of the economy which is where the jobs really are. Of course to some extent given what we see on Wall Street, a better sort of an environment on wall street, the stock market doing better, the financial services industry is getting healthy and that’s another place you can look for jobs.

JEFFREY BROWN: Finally, briefly, just look ahead for us. Can we maintain this rate of growth in jobs?

HUGH JOHNSON: No. You know, nobody knows for sure, but I would say that 150,000 to 200,000 is probably the range of average monthly increases in jobs. Remember the numbers we’ve seen for the last three months from March, April and May, particularly the 300,000-plus for March and April, those are unusually strong. You’re not going to see those, I don’t believe. I think it’s going to be closer to 150,000 to 200,000, and hopefully closer to 200,000 in the months to come.

JEFFREY BROWN: Okay. Hugh Johnson, thanks very much.

HUGH JOHNSON: My pleasure.