U.S. Jobs Picture
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RAY SUAREZ: Today’s jobs report showed growth throughout the economy. Two hundred and seven thousand new jobs were created in July, the biggest gain in three months, in sectors such as retail, healthcare, education and business services, among others. One weak spot was the factory sector. Manufacturers dropped 4,000 workers last month. The report also showed that average hourly earnings rose 0.4 percent, the biggest rise in a year.
Here to walk us through all the numbers and what they mean is former Labor Department chief economist Lisa Lynch, now professor at the Fletcher School at Tufts University. Professor Lynch, what does this month’s report tell you about the overall job market?
LISA LYNCH: Well, Ray, this is a terrific solid report and there are a lot of us that are very happy to see this strong number coming in on the employment side. We are currently averaging close to 170,000 net new jobs per month if you look over a three month moving average for jobs. So this number of 207,000 net new jobs is a good solid number. It addresses the unemployment — people that are unemployed — it keeps pace with the growth of the population and it is just a terrific report.
RAY SUAREZ: Well, with that 200,000 figure for last month and upward revisions for May and June, are there any particular regions of the country or particular sectors of the economy that are real standouts?
LISA LYNCH: Well, what is — makes this report stand out, again, is the breadth of the gains of employment. So as you noted, there was increased employment in services and this was across all the services sector. Retail added 50,000 jobs, but we had increased employment in finance insurance real estate, in business services, and in healthcare. And we had continued growth in the construction sector.
All of these parts of the economy, especially when you look over the past year, have been producing steady net new jobs for the U.S. economy. As you noted, the dark spot is the manufacturing sector. We’re down 4,000 jobs from last month and from the peak in employment, the last peak in employment and manufacturing, which was exactly four years ago in July of 2000 were down three million jobs in the manufacturing sector.
RAY SUAREZ: The overall rate of unemployment is about 5 percent. Is that a tight enough job market to be forcing wage hikes?
LISA LYNCH: Well, we saw an increase in the wage rate in this month’s report, 6 cents an hour on hourly wages. And some on Wall Street got a little nervous about that because they were worried that this might be an indication of inflation to come. But when you look at the wage number over the year as a whole, you see that hourly and weekly wages have increased just by 2.7 percent. So that’s just keeping pace with inflation. So you don’t see a lot of sort of wage inflationary pressure in this report or in other reports that look at wages and compensation in the U.S. economy.
RAY SUAREZ: But do you agree with analysts who now expect the Fed to raise interest rates again at the next meeting of the Open Market Committee?
LISA LYNCH: Well, I don’t think there’s anybody around who’s not expecting the Fed to make a move next Tuesday, that’s well priced into the markets. I think what happens with these job reports, they jump around a lot from month to month and there’s some concern that if you see a set of months where the employment numbers well over 200,000 and a set of months with rage increases that are very hefty, that that may raise concerns of inflation and the Fed may change the rate of its measured pace of increasing interest rates.
RAY SUAREZ: The executive outplacement firm Challenger took a look at the job market overall and noted that even while very large numbers of new jobs were being created, announced job cuts for the coming months were also unusually high. Does that tell you anything?
LISA LYNCH: Well, you know, there’s a lot of announcements that get made and then there’s actions that happen, and they don’t necessarily go hand in hand, but clearly when you have, for example, in the automobile sector this month’s report indicated 11,000 jobs lost in the auto sector. You have manufacturers making announcements of proposed job cuts going forward over the next three years that are large. That obviously gives you pause, and especially, I think, in the manufacturing sector is ominous in terms of looking forward for future growth in that sector.
RAY SUAREZ: When you get further down into this month’s statistics, past the new jobs created and the manufacturing jobs lost, what do some of the other numbers look like? In past years, there had been, for instance, troubling statistics about long-term unemployed people and older white collar workers in particular who were out of work for much longer spells before they were able successfully to locate a new job.
LISA LYNCH: Well, what you see in today’s report is that this share of people that have been out of work for six months or more is about 18 percent. So a little fewer than one in five workers has been out of work for six months or more. That number had been higher earlier in the year. So the proportion of workers that are unemployed for six months or more has been dropping.
Also in this month’s report we saw that the number of people that are discouraged for work, while that has stayed around 600,000 over the past year, that that number did not increase. And it had been increasing in previous months. So from that point of view, these are — these are good indicators in terms of what’s happening in the economy.
RAY SUAREZ: In the past couple of weeks, an economist for the Federal Reserve Bank of Boston reported that what she saw as an unusually large number of workers in prime earning years were leaving the work force and thus not being counted as unemployed. Does that distort the picture a little bit?
LISA LYNCH: Well, it’s interesting. That study from the Boston Federal Reserve Bank showed a lot of interesting dynamics in the labor market. First of all, we see that teenagers and young adults are not in the labor market to the same extent that they had been in the past. But a lot of that seems to be related with people staying on in school or returning to school. So that’s a good thing.
But then when we look at prime age workers, especially women workers, there seems to be some indication that a lot of those workers have dropped out of the labor force in greater numbers given where we are in the recovery than has been the case in the past. But this has been kind of a whacky recovery, frankly, and no one has been able to forecast particularly well the growth and employment numbers from month to month. And I think some of the demographics that we’re seeing could very easily change going forward.
What comes out from that study that’s particularly interesting is that people 55 years and older are much more likely to be in employment today than they would have been in the past at this stage of the business cycle. So what is — seems to be coming out is that as the work force is aging, people are staying on and work longer.
RAY SUAREZ: Professor, thanks for joining us tonight.
LISA LYNCH: It’s my pleasure, Ray.