Jobs Byte 8/3/01 by Dean Baker

["Robert Naiman" <naiman@xxxxxxxx>]

August 3, 2001

Employment Drops Again in July

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Wage growth has slowed, even though the
unemployment
rate is still low
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The July employment report indicated that the
labor market is
continuing to deteriorate, as the economy lost
42,000 jobs. Excluding
government employment the picture looks
considerably worse. The
private sector lost 73,000 jobs in the month and
has lost 211,000 jobs
in the last two months. Private sector employment
now stands just
369,000 above its year ago level. In spite of the
job loss, the
unemployment rate remained stable at 4.5 percent.

The job loss continues to be concentrated in
manufacturing, which lost
49,000 jobs in July. Manufacturing employment has
fallen by 162,000 in
the last two months and is now 837,000 below its
year ago level. The
vast majority of the job loss in manufacturing has
been among
production workers. Jobs for production workers
have fallen by 764,000
over the last year, accounting for 91.3 percent of
the decline in
manufacturing employment. This is noteworthy since
manufacturing
rovides relatively high paying employment for
workers without college
degrees.

The manufacturing industries with the biggest job
losses in percentage
terms over the last year are textiles, with a loss
of 60,000 jobs
(11.3 percent of total employment), apparel which
lost 64,000 jobs
(10.0 percent), primary metals with 52,000 lost
jobs  (7.4 percent),
and motor vehicles with 70,000 lost jobs (7.0
percent).

While manufacturing continued its decline in July,
there was little
strength elsewhere. Construction employment was
essentially flat in
July. It is down 61,000 from its March peak.
Trucking and warehousing
employment has been essentially flat for the last
four months. It
stands less than 0.3 percent above its year ago
level.

Employment in wholesale trade was also flat in
July. It is now 6,000
below its year ago level. Jobs in communications
have been little
changed over the past 3 months, although they
still stand 50,000 above
their year ago level. This is striking given the
large number of
layoffs announced in this sector. Retail trade had
a small gain in
July which was offset by a decline in employment
in financial ervices.

The personal and business service sector was
reported as losing 23,000
jobs. If this number isn't changed significant, it
will be the first
reported job loss in history for this sector. A
previously reported
decline of 6,000 jobs in June was revised to a
gain of 9,000. The
biggest source of job loss in this sector was a
decline of 42,000 jobs
in the temporary help industry. Employment in the
industry is down by
387,000, 11.0 percent, from its year ago level.

The weaker labor market seems to have already
affected wage growth.
Over the last quarter wages have grown at just a
4.0 percent annual
rate. This is down from a 4.4 percent rate over
the last year. Given
that the unemployment rate is still well below the
level that many
economists consider sustainable (or the NAIRU),
this deceleration of
wage growth is striking.

Given the pace of job loss reported in the
establishment survey, the
household survey was relatively positive. There
was little change in
the overall numbers for unemployment and
employment to population
ratios. There was a slight improvement for blacks
and Hispanics,
although not statistically significant.

Consistent with the weakness shown in the
establishment survey, there
was a year over year rise in the number of
discouraged workers. Also,
the percentage of unemployment attributable to
people who voluntarily
quit their jobs is continuing to decline. Alan
Greenspan has regularly
referred to the quit rate as measure of workers
confidence in their
ability to find new jobs.

The employment diffusion indexes, which measure
the percentage of
industries that intend to increase employment over
various time
periods, continue to paint bleak picture. The
three month overall
index stood at 44.6 percent, its fourth
consecutive month under 50.
The three month manufacturing index is at 26.1
percent, its sixth
consecutive month under 30.

These readings are both extremely negative. The
manufacturing index
has already fallen almost as low as at the bottom
of the last
recession. The overall three month index has never
been below 50 since
it was created in 1977, except when the economy
was entering or in a
recession. The overall three month index first
fell below 50 in April
of 1990, 3 months before the recession officially
began.