Baker Data Commentary

[Richardson_D <Richardson_D@xxxxxxx>]

Jobs Byte
By Dean Baker

Jobs Byte is published each month upon
the release of the Bureau of Labor
Statistics' employment report.  For more
information or to subscribe by fax or email
please contact the Center for Economic and
Policy Research at 202-293-5380 ext. 206, or
email barford@xxxxxxxxx

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Manufacturing Loses More Jobs In December

The December employment report provided more
evidence that the economy is slowing, with the
manufacturing sector clearly taking the biggest
hit. There were 105,000 new jobs reported in
December, but only 49,000 of these were in the
private sector. On average, the private sector
has been reported as adding just 84,000
workers per month over the last quarter.

This rate of job growth is far less than the
160,000 jobs each month that the Bureau Labor
Statistics (BLS) imputes into its figures
based on the assumed rate of job growth in new
firms that are not captured in its survey. The
estimate of 160,000 jobs in new firms is based
on the economy's growth rate in previous
quarters. Because the economy grew very rapidly
in the first two quarters of 2000, the number
of jobs being imputed each month for the fourth
quarter is quite high. When the economy is
growing at 2.0-3.0 percent rate the imputation
would typically be in the range of 60,000-
90,000. This means that actual job growth may
actually have stopped in the last three months.

The situation in manufacturing is especially
bad. The sector was reported as losing 62,000
jobs in December, compared with a November
figure that was revised down by 15,000. The
average workweek was reduced by 0.8 hours, with
average overtime hours falling by 0.3 hours.
This was the largest one month decline in hours
worked in manufacturing since a drop of 1.5
hours in January of 1982 (which was completely
reversed the next month). The index of hours
worked in manufacturing has fallen at an 11.3
percent annual rate over the last quarter.

The falloff in manufacturing is widespread but
the automobile industry has been hit especially
hard. While the industry has reported a loss of
only 8,000 jobs in December, the average
workweek was reduced by 3.0 hours for the
month. The index of hours worked in the
industry has declined at a 33.0 percent annual
rate over the last three months.

Job growth outside of manufacturing was
generally slow. The transportation and utility
sector added 23,000 and finance added 19,000
jobs, while retail trade added just 8,000.
Construction lost 13,000 jobs, but employment
in the sector is still at a relatively high
level.

The temporary help industry, which is generally
seen as a good indicator of the current
strength of the labor market, lost 58,000
jobs in December, pushing employment 98,000
below its September level. The job loss in this
sector is probably understated in this data,
since many of the jobs that BLS imputes for new
firms appear in this figure.

In spite of the evidence of weak job growth in
the establishment survey, the household survey
continues to show a positive picture of the
labor market, as unemployment rates remain
near their cyclical lows. This is not
inconsistent, since the establishment survey is
indicating the direction of change in the labor
market whereas the household survey can best be
seen as presenting the current state, or level,
of the labor market. It takes several months of
slow or negative job growth before there is a
significant effect on the level of
unemployment.

The one area suggesting weakness in the
household data was a further decline in the
percentage of unemployment attributable to
people who voluntarily quit their jobs. This
figure fell by an additional 0.3 percentage
points in December after a drop of 1.7
percentage points in November (the October
figure was unusually high). This figure can be
taken as evidence that workers are getting more
pessimistic about their job prospects.

In spite of the evidence of weaker job growth,
wage growth appears to be healthy, with the
average hourly wage rising at a 4.7 percent
annual rate over the last three months,
compared to a 4.1 percent rise over the last
year. This increase was driven by unusually
large gains in wholesale trade, finance, and
services. However, in December the wage gains
were more than offset by the reported decline
in hours, with average weekly earnings dropping
by 0.2 percent.

On the whole, this report provides solid
evidence that the economy is weakening, with
job growth having virtually stopped. The
manufacturing sector is in a recession for all
practical purposes.

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