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Reading the Numbers

The Labor Department revised its initial estimates and reported that the American economy added 286,000 new jobs between August and October. Despite this good news, 8.8 million people were still unemployed last month. Ray Suarez dissects the latest numbers with the former Labor Department chief economist, Lisa Lynch.

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  • RAY SUAREZ:

    Today's employment report contained some good news about the last few months. The Labor Department revised initial estimates and reported that the economy added 286,000 new jobs between August and October. But despite the good news, there were still 8.8 million people unemployed last month. Of that group, two million have been out of work for six months or more. Joining me now to discuss all the numbers and what they mean is Lisa Lynch, former chief economist of the Labor Department.

    She is the academic dean of the Fletcher School of Law and Diplomacy at Tufts University. Professor Lynch, what do these latest numbers, coming on the heels two of months of job growth previously reported, tell you about the state of the job market?

  • LISA LYNCH:

    Well, today we finally got some good news in the economy, and just in time for the holiday season. I think a lot of people were, economists were caught off guard in a good way, in terms of the jobs report. Not only did we have 126,000 new jobs added to the economy, but we had upward revisions for employment in both August and September that really, those three months taken together, suggest that we may have finally turned the corner in and finally we are starting to see in the labor market increases in employment that are beginning to catch up with what we've already seen in the output for the economy, the growth of the economy.

  • RAY SUAREZ:

    Do we know in which sectors those new jobs are being created?

  • LISA LYNCH:

    Yes, the employment growth was located primarily in the service sector, although again the good news was that that was distributed across many different parts of the service sector. So we saw employment go up in the education and health services sector. We saw employment go up in professional and technical services. We saw employment go up in eating and drinking establishments. And an important leading sector, in terms of the economy, we saw increases in the temporary help industry as well.

  • RAY SUAREZ:

    What about manufacturing?

  • LISA LYNCH:

    Well, there is a lot of good news in this report, but there is still a lot of sobering news in this report. Manufacturing is one of those sectors. Again, manufacturing lost 24,000 jobs in the past month. And that's the 39th month, consecutive month that we've seen employment loss in the manufacturing sector. So since its peak back in 2000, the manufacturing sector has shrunk by about 16 percent. So it's been regards significant and while the job loss this month was less than it has been, it continues to decline.

  • RAY SUAREZ:

    I think you counted employed, even if it was just a brief time during the previous week, do we know how many of those are part-time workers, or workers who are working part time but would like full-time work?

  • LISA LYNCH:

    We don't know out of the 126,000 how many of them are full time or part time of that particular survey, but we do know that there are 1.4 million people that are in employment that are in part time employment who say they would like to work full time, but they can't. And we have another 460,000 or so people that say they would like to work, but they've gotten very discouraged with their local labor market job conditions and have stopped looking for work.

  • RAY SUAREZ:

    These new job numbers come on the heels of a Gross Domestic Product number that was way up, reported a little earlier this month. How are those two numbers related? And will we have to have continued GDP growth in order to see things improve in the jobs picture?

  • LISA LYNCH:

    Well, this recovery has been rather unusual, and actually it is quite unprecedented, the recovery, because we have officially been in a recovery since November of 2001. And usually at this stage, so many months after the end of a recession, you would have already have seen fairly robust job growth. And we've not seen it until today's report.

    So the good news is that we are getting output growth that's very rapid and strong and that should put pressure on to the labor market, make employers feel more confident that they could go out and hire more workers. But it has taken an extraordinarily long amount of time for us to see this up tick in jobs. And even this increase of 1236,000 new jobs this month, it's a good number. It's positive.

    We have three months of positive numbers. But as an economy, we need about 150,000 net new jobs added every month just to keep pace with the growth of the population. And if we want to make a dent in the 2.4 million jobs that have been lost since recession began, we need much stronger growth than that on the jobs front.

  • RAY SUAREZ:

    As an economist, as someone who has watched the labor market very closely for years, why do you think it's taken so long, so many quarters of economic growth to start turning around the picture in the unemployment numbers?

  • LISA LYNCH:

    I think there are a variety of factors in play. One of the factors has to do with the extraordinary growth we've had in productivity as well. We had very rapid productivity growth, even in the run up before the recession. We've continued to see that. We've had sizzling productivity numbers, well over 8 percent increase in productivity most recently reported. And what happen is that employers find that they can get product out of the door, using the existing work force. So they've become increasingly efficient. So they don't have the same pressure to hire new workers. But that's a short run effect.

    And what should happen as the economy grows is that employers begin to increase the employment. But I think employers have been very cautious in terms of doing hiring. Part of that is related to uncertainty associated with the war in Iraq. Part of it may be associated with uncertainties in terms of corporate scandals, et cetera. And then there is an ongoing discussion about, especially in the manufacturing sector, has there been a permanent outsourcing of jobs outside the United States?

  • RAY SUAREZ:

    What does it tell you that such a large number of the unemployed are people who have been unemployed for a long number of months?

  • LISA LYNCH:

    We have now almost one in four workers that are unemployed have been out of work for six months or more. And again that suggests that we need to see job growth numbers much bigger than 126,000 a month to begin to make a dent into those folks, because individuals that have been out of work for six months or more, they've exhausted all the resources that they could have at their disposal to address the loss in income. And for them, they need a really very strong up tick in the labor market to pull them back into employment.

  • RAY SUAREZ:

    Professor lynch, thanks for joining us.

  • LISA LYNCH:

    Thank you, Ray.

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