Employment Flat in February
By Dean Baker
March 5, 2004
WAGE GROWTH IS 0.5 PERCENTAGE POINTS BELOW INFLATION.
The February employment report was surprisingly weak, showing a gain of just 21,000 jobs. Since the jobs numbers for January were revised down by 23,000, the jobs figure for February is just under the level previously reported for January. The household survey showed a similarly bleak picture, with hundreds of thousands of workers leaving the labor force. The employment to population ratio (EPOP)
fell 0.2 percentage points to 62.2 percent, just above the 62.1 percent low-point hit in September. With so many workers leaving the labor force, the unemployment rate remained unchanged at 5.6 percent.
The picture on the household side is consistent with past patterns. The largest falloff in EPOPs was among white teens (0.7 percentage points), black teens (1.1 percentage points) and black men (1.3
percentage points). Since the peaks in 2000, the EPOPS for both black and white teens have fallen by 10 percentage points, while the EPOP for black men has fallen by 5 percentage points. Overall, the EPOP is down 2.2 percentage points from its peak.
The EPOP for people with college degrees has fallen by 1.1 percentage points in the last two months. However, this data is erratic, and may be reversed in coming months.
Consistent with past patterns, older people are aggressively seeking employment, the number of employed people over age 55 rose by 117,000 in February. This age group has accounted for 98.6 percent of the employment gains shown in the household survey over the last year.
Virtually all other data in the household survey indicates continued weakness in the labor market. The percentage of unemployment due to people voluntarily leaving jobs remains near its low for the cycle,
the percentage of long-term unemployed remains near its high, and the number of discouraged workers is above the level in February 2003.
The picture in the establishment survey is no brighter. There was zero growth in private sector employment in February. In fact, with the downward revisions, the private sector jobs figure for February is 35,000 below the level previously reported for January. Over the last three months, private sector job growth averaged just 37,000 per month.
There is no sector showing any substantial strength at this point. Construction, which had added 54,000 jobs between October and January, lost 24,000 jobs in February. Retail trade added a modest 12,700 jobs, but this follows a downward revision of 20,200 (17,400 in department stores) to the number previously reported for January. The number of jobs in this sector is virtually unchanged
since October.
The temporary help sector added 32,000 jobs, although this follows a drop of 13,000 in January. Over the last four months, the growth in temp jobs has averaged 21,000. However, this does not necessarily presage more rapid growth in standard employment. Job growth in the temp sector averaged 26,000 a month from April to September of last year.
There was little change in hours, either overall or by industry, although the average over-time in manufacturing is down 0.1 hour from the level previously reported for January. The only bright spot on
the employment side is that declines in manufacturing employment may have finally leveled off, with the number of jobs declining by just 3,000 in January.
Wage growth continues to slow. The average hourly wage grew at an annual rate of just 1.4 percent over the last quarter, down from an already meager 1.6 percent rate over the last year. Low wage workers seem to be faring even worse, as retail wages are up just 1.1 percent from year ago levels. With inflation – driven by energy prices – at 2.0 percent, workers are seeing declining real wages.
The continuing weakness of job and wage growth in this report provides serious grounds for concern about the sustainability of the recovery. With workers' buying power stagnating, consumption growth
cannot be sustained, except by ever greater levels of debt. Many analysts had mistakenly assumed that large tax refunds would boost consumption – ignoring the capital gains tax owed on last year's
stock earnings. Without such a boost, it is hard to see what can sustain the recovery through the summer.
A Baker Economic Data Commentary
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