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Economics correspondent Paul Solman looks at the job market around the country.

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PAUL SOLMAN: Jobs, jobs, jobs. It's the mantra of politicians, businessmen, and average citizens alike that in 1997 we seem to have gotten what we asked for. According to the latest government numbers only 4.6 percent of the work force is now unemployed, a 24-year low. America experienced a net gain of 3 million jobs this year, and compensation increased faster than prices; that is, wages and other benefits grew by 3 percent, while inflation rose at a meager 1.8 percent, the lowest rise since 1986. To find out what's happening in specific parts of the country we're joined by four regional economists, starting with the Northeast and Rae Rosen of the Federal Reserve Bank of New York. Welcome.

RAE ROSEN, Federal Reserve Bank of New York: Hi, Paul.

PAUL SOLMAN: And in the Northeast, what's happening with jobs?

RAE ROSEN: What's happening is we got more than we expected. Throughout the year we had to continually raise our forecast for the Northeast. Job growth truly exceeded our expectations.

PAUL SOLMAN: So let's go to the Southeast next. That's Professor Gary Shoesmith of Wake Forest University. Professor Shoesmith, what's happening in the Southeast?

GARY SHOESMITH, Wake Forest University: Well, pretty much the same thing. More jobs have been generated than we expected, but here recently, with unemployment pressing so low, it's becoming more and more difficult to generate new jobs, especially in states like North Carolina, where unemployment is less than 4 percent statewide.

PAUL SOLMAN: So generate new jobs more difficult how? I mean, what do you mean exactly?

GARY SHOESMITH: Well, difficult to generate jobs because there aren't enough folks to fill all the job vacancies.

PAUL SOLMAN: You mean, so if you have a company, you just can't find people for the job that you might, in fact, have?

GARY SHOESMITH: There are ways of attracting workers, usually involve some way of pirating a worker or workers from another company, and a lot of incentive packages have been put together to do exactly that.

PAUL SOLMAN: So there's a bidding amongst you, even inter-regionally? I mean, are you bidding for people from Rae Rosen's Northeast here?

GARY SHOESMITH: Well, there are finder's fees and other incentives for people within the company to bring someone in. The finder's fee goes up if they stay a certain amount of time afterwards. So if they can attract someone from another region of the country, that's just fine too. In fact, that's part of the problem in the Southeast. We relied on other parts of the country for a steady stream of workers and here recently, with good jobs available just about everywhere, it's becoming harder and harder to keep that up.

PAUL SOLMAN: All right. Let's go to the Midwest. Diane Swonk, First Chicago Bank, and what's happening there?

DIANE SWONK, First Chicago Bank: Well, we're literally running out of people to employ here. We've actually got a situation going on in some parts of the region where we've got less than 2 percent unemployment and actually declines in employment because there's more people retiring out of the labor force than actually entering it. The unemployment rate is still declining in those areas, but many employers are finding they're particularly hard to fill entry level positions. The younger workers, the baby bust is starting to put a squeeze on the region, so it's a real strange spot for us to be in here in the Midwest when we peaked up at 25 percent unemployment rates in some parts of the region back in 1982.

PAUL SOLMAN: What about immigrants coming in? I've been reading Iowa, places like that, that there are Cambodians, people--pockets of immigration in places you would have never imagined.

DIANE SWONK: There are pockets of immigration. Frankly, we could use more to keep employment growth going here. We literally are starting to hit our head on the ceiling of economic growth, but frankly, we're just too far in the middle of the country to get the same kind of flood of immigrants that you've seen in other parts of the country. The other thing hurting us, much like the Southeast, is that we're not seeing a migration between regions that we had seen. We had seen some movement out of California, for instance, several years ago, which has abated now that California is doing better, and we're not seeing much of that movement here. Unfortunately, we also don't have quite as good of weather as they do in the Southeast, and we found most people, until we get some global warming on like Michigan and some palm trees, they don't want to seem to settle in Chicago. They're still going South.

PAUL SOLMAN: So you're rooting for global warming out there in the Midwest?

DIANE SWONK: We're trying to do the best we can.

PAUL SOLMAN: All right. Let's get to our last person from the West Coast. This is Cecilia Conrad, Pomona College, just outside of Los Angeles. She's joining us from Dallas. Welcome. And is the picture that rosy? I mean, so far--well, you've heard--we've all heard.

CECILIA CONRAD, Pomona College: The news in California is that finally we sort of joined this train. The Northern region of the state has very, very low unemployment that sort of matches what's going on up in Seattle, where someone said that in order to get a job there you just have to pass a mirror test. If you can fog the mirror, you'll get a job.

PAUL SOLMAN: If you can fog a mirror?

CECILIA CONRAD: Yes. (laughing)

DIANE SWONK: If you're alive.

PAUL SOLMAN: Oh, you mean, if you're alive. Thank you, Ms. Swonk.

GARY SHOESMITH: What's the pay for that job? (laughing)

PAUL SOLMAN: Prof. Shoesmith wants to know what the pay is for that job?

CECILIA CONRAD: Well, I don't know. I heard a story of someone--a beautician who lost a shampooist to Boeing, so--

PAUL SOLMAN: What?

CECILIA CONRAD: --there's some real competition. A beautician lost a shampooist to Boeing Aircraft. In Southern California things aren't quite as rosy. Our unemployment rate has been going down in LA, but it's still above national averages. It's around 7 percent.

PAUL SOLMAN: 7 percent. Well, that's whopping. And you've got lots of immigrants there, right?

CECILIA CONRAD: We've got lots of immigrants. The job growth that's taking place is taking place in sort of a high-tech sector, but we have still a fairly large pool of low-skilled workers who I'm a little worried haven't become completely part of this growth trend.

PAUL SOLMAN: So who isn't getting the job? Stay with you for a moment, Ms. Conrad. I mean, who are the people who are getting hurt by--in this economy--assuming for a moment--I mean, I'm a journalist, I'm always pushing that question, but assuming for a moment that some people are?

CECILIA CONRAD: I think what's happening here are if we look at people with just a high school education or less than high school education, particularly the lowest skill, those with less than a high school education in the LA area, one of the sectors that used to employ them was in apparel, and that sector has been moving out, moving south of the border, and moving to other countries, and so those jobs have sort of dried up. So that group, while I think there's some evidence that they could become part of this group--we see little evidence of hope here and there--I'm worried that they haven't been completely helped by this growth trend.

PAUL SOLMAN: What about inequality? I'll go back around the country in a second, but I want to stay with that because we've heard so much about inequality. I have reported on it myself an awful lot over the years. Has inequality begun to shrink, or are you talking about a situation where it's the same as it was or increasing as the people without the high school educations get hurt?

CECILIA CONRAD: I think inequality has begun to shrink a bit in LA. I'm optimistic that things are improving for the sector. We've got some growth in construction, which helps you--help to employ some of those workers. We've also seen some trends in racial inequality in the state that are promising. Last--in the last data that's available--the 1996--the median household incomes for African-American families grew by something like 25 percent in the West.

PAUL SOLMAN: 25 percent?

CECILIA CONRAD: Yes. That's just incredible. And there was a growth also for Hispanic households but not so much of a growth in the white households. And so we might see a little bit of lessening of racial income inequality in the West as well.

PAUL SOLMAN: Ms. Swonk, what about who's not getting the jobs in the Midwest and the inequality issue?

DIANE SWONK: Well, there are very few people who are not getting the jobs. They're not always getting the jobs they want, per se, but they are getting jobs. And the inequality issue has kind of been two things going on: First of all, we have seen some increase in entry-level wages. It's very common here now to pay eight, nine, and ten dollars an hour at your typical fast food restaurants and offer benefits. There's big signs out that are saying if you want to work part-time at McDonald's, you get benefits now, a very different situation than we saw in the past. Interesting, though, many of those benefits are coming out of the hides of some of the full-time workers. I know one retailer in the area that cut back on benefits on their full-time personnel, particularly their staff and backroom personnel, to offer benefits to part-time retail workers, even during the Christmas season. Very different kind of equation where the tightnesses at the entry level--we're seeing things sweeten up a bit, which is helping bid up wages, and the kind of packages that those people get. On the flip side of it there's still a lot of sort of middle management workers and full-time workers that are feeling very mixed about this economy, even as good as it is here in the industrial Midwest.

PAUL SOLMAN: Prof. Shoesmith, inequality and who's not getting the jobs, those two questions connected.

GARY SHOESMITH: Well, in the Southeast it's easy to identify those that aren't getting the jobs, even those that are losing jobs, and that's in textiles and apparel, much like in California. Back in the beginning of 1996, we were losing jobs across the Southeast to the tune of 18,000 per quarter on a seasonally-adjusted basis. That quickly dropped to around 9,000 a quarter by the first of this year, but it's still hanging in there at about 8500 jobs per quarter. So the situation in textiles and apparel is still fairly chronic here in the Southeast, and it's hard to picture those workers, say a textile worker, leaving a textile plant for the last time, and then walking into one of the jobs that you can find in banking and finance or health care and some of those industries. So I think a lot of those workers that are leaving textiles and apparel, actually leaving the area as well, but as far as inequality, low-skilled workers, I think, have a very, very dim outlook for the future. They'll either be unemployed or employed at very low wages. So I'm not as optimistic as some other folks as far as inequality shrinking.

PAUL SOLMAN: Okay. What about the Northeast? Rae Rosen, inequality, and who's not getting the jobs?

RAE ROSEN: There's no doubt that the inequality has increased, particularly in New York State.

PAUL SOLMAN: Increased in New York State. We heard--

RAE ROSEN: Increased in New York State.

PAUL SOLMAN: --out in the West Coast at least the racial inequality seems to have dropped but not in the Northeast.

RAE ROSEN: I would doubt that the racial inequality has dropped as well. The problem is in the Northeast, particularly in New York State, we have two clumps of people at opposite ends of the spectrum. We have a disproportionate number of very well-educated people with graduate degrees, you know, Master's, a doctorate, and we have a disproportionate number of people without a high school diploma, though some of those are our own creation, we cannot graduate them from high school, and we do a far poorer job of that than many other cities across the country, and then we have a large volume of immigrants coming in. And to the degree that they don't have a high school diploma, it's very hard to employ them.

PAUL SOLMAN: But the disproportionate number of people who have the Ph.D.'s should drive down the wages up in that part of the spectrum--

RAE ROSEN: What we find is that we have a disproportionate number of the high, high wage earning people and a disproportionate number of the low because you can't cross employ.

PAUL SOLMAN: So the people who have got the Ph.D.'s are getting the jobs, even though there are a lot of them?

RAE ROSEN: Very definitely. The people who've got the Ph.D.'s are employed as bankers or in finance. If we could bet a trained blue collar mechanic, that person could walk out with a $40,000 job tomorrow, but one of the problems is that many our schools quit training blue collar mechanics.

PAUL SOLMAN: What about inflation? I mean, if there's so much push for--there's such a tight job market, then are you, Ms. Rosen, thinking that inflation is just around the corner because inevitably all these bonuses and piracy we've been hearing about will drive up wages and, therefore, ultimately drive up prices?

RAE ROSEN: We're certainly worried about it in the Northeast, but we just haven't seen any signs of rampant inflation. We aren't seeing a boom this year or this period the way we had in the 80's. We haven't seen real estate prices run through the roof and prices double in five years. We haven't seen the same thing happen in wages. It's just not imbedded in the economy. But it's something we'd certainly be worried about. There's about $12 billion that's going to be distributed by Wall Street to 155,000 people. That's a lot of money to a very small sector.

PAUL SOLMAN: So the prices may be--housing prices may be going up.

RAE ROSEN: Luxury coops and condos are going to go through the roof.

PAUL SOLMAN: Professor Shoesmith, what about you, what about inflation in the Southeast, North Carolina is where you are, but in general?

GARY SHOESMITH: Well, I don't think the inflation is really tied to some, any particular geographic region. It's really more along the lines of industries. And I think here in the U.S. economy in 1998 we're going to see really two economies: one economy consisting of industries that don't face a lot of stiff foreign price competition. Those companies will be able to pass along increased wages into prices. Then the other side of that, the industries that do face intense price competition from abroad are going to take it on the chin in terms of profits, I think. In fact, we've already seen quite a bit of that happening. In durable goods, for example, deflation has already been occurring now for the past five or six quarters.

RAE ROSEN: Could I interrupt?

PAUL SOLMAN: Yes, please.

RAE ROSEN: I think the right word is goods versus services. The goods we get competition from abroad. And prices are going to be contained, and we may see prices declining for some goods. But for services it's very hard to compete. You have to pay a fireman here. You can't redeploy ‘em in Ireland.

PAUL SOLMAN: And that's where you might see some pressure?

RAE ROSEN: You might see--and services dominate the economy today.

PAUL SOLMAN: Professor Shoesmith.

GARY SHOESMITH: You know, there are some goods, though, that'll be subject to the same discrepancy in inflation, building materials, for example, that can't be shipped because of their weight versus value. Now, those kinds of products will also be experiencing quite a bit of inflation because of the lack of competition.

PAUL SOLMAN: Let's move to Asia as this Asian crisis envelopes us and has everybody interested. Ms. Swonk, Asia will not affect the job situation in the Midwest, you don't think?

DIANE SWONK: I think it certainly is a risk, but one of the things we have going for us in the Midwest, it's already affected us a little bit--there has been a slowdown in exports to that part of the world. The good news for us, there's been a pick up in exports in some surprising places, and some places we did expect. Europe has done much better than we thought, especially in terms of capital goods and autos, which is frankly what we make here in the Midwest. We've also seen exports surge to Latin American economies. There's clearly a risk of contagion with regards to the Asian crisis. If we see some investment flows really slow dramatically into Latin America, that could certainly hurt us, but so far we've not seen it, and prospects remain relatively good South of the border and frankly North of the border in Canada. Canada is our largest trading partner, very close trading partner here in the Midwest to us, and that's been a major buyer of our goods as well. So for now we're a little bit insulated. It is a concern going forward, but frankly, since we're already running out of people to employ, it's not that big of an issue in terms of really holding down growth.

PAUL SOLMAN: Well, let me finish with one last question for Cecilia Conrad, and that's the same Asia question. We're running out of time, but California is the place where presumably you'd see it.

CECILIA CONRAD: That's right.

PAUL SOLMAN: Are you seeing it?

CECILIA CONRAD: Asia could be a problem for California in several ways. First of all, in the export, we sort of built our ability to grow on being part of the specific rim--Pacific Rim--sorry about that.

PAUL SOLMAN: Well, it's a specific rim. You're quite right.

CECILIA CONRAD: And we also have 175,000 Californians, which is just about 1 percent of overall employment, employed in Asian-owned companies in California, and there's some concern that those companies may start to cut back because of the downturn in those economies. We also have quite a bit of Asian investment in real estate, and we're a destination for tourists from Asia. So there are several different ways in which this could have a slowdown on the California economy.

PAUL SOLMAN: But last word, you're not--you don't look scared.

CECILIA CONRAD: I'm not scared.

PAUL SOLMAN: Okay. Well, let's leave it there. Thank you all very much. Appreciate it.

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