July 6, 2007 (Jobs Byte)
By Heather Boushey
Inflation-adjusted wages have been falling in 2007.
The economy added 132,000 new jobs in June. Data for April and May were revised upwards by a total of 117,000 jobs. Overall, the employment report shows many signs of a healthy labor market: unemployment remains at 4.5 percent, and the share of the population with a job—the employment rate—rose back to 63.1 percent in June, after falling to 63.0 in April and May.
There are also other signs that the pace of job creation is slowing. The establishment survey shows that in 2007, the economy added an average of 145,000 new jobs, compared to a monthly average of nearly 190,000 in 2006. The household survey shows fairly flat employment growth over this time period, adding only an average of 36,000 new jobs each month, compared to a monthly average of 262,000 in 2006.
Trends in the household and establishment surveys tend to diverge more when the economy is near an inflection point, moving from recession to expansion or vice versa. At the beginning of this economic recovery, the household survey showed stronger employment growth, compared to the establishment survey. At this point, the establishment survey may be overestimating employment if the BLS’s imputation model is overestimating firm “births” and underestimating firm “deaths.” The model is based on the past five years of job creation, but cannot accurately predict when an economy is near an inflection point.
Nearly half of June’s job gains were in health care. While the private sector added 92,000 new jobs, health care employment rose by 42,300. Manufacturing shed 18,000 jobs in June, but construction added 12,000 new jobs, with 2,000 of these in residential building. This is odd and is something to watch in future months; residential construction is down significantly so it is unclear why the establishment survey is reporting employment gains. Another indicator to watch in future months is temporary help employment. This sector had no employment gains in 2006, and so far this year has shed nearly 48,000 jobs, losing 7,900 jobs in June. This may indicate that employers are shedding excess labor and that they will not be looking to hire in future months.
Average hours of work rose last month, as did wages. Average hours have vacillated between 33.8 and 33.9 since early 2006, which is higher than the trends for 2003-2005, when average hours were closer to 33.7. The index of aggregate weekly hours rose from 107.3 to 107.8 last month, following its trend upwards. Wages rose last month by $0.06, which puts annualized quarterly wage growth at 3.8 percent, slightly below inflation. The hours growth implies that productivity growth is likely to be less than 1.0 percent for the quarter, which will mean that the economy has seen three years of less than 1.5 percent growth.
Even though the household survey has not shown strong employment gains, there are indications that workers who want to work can find jobs. The share of the unemployed who have been out of work for at least six months fell again in June, from 16.4 percent in May to 16.2 percent in June, which puts it slightly below the 16.3 percent of June 2006. At the same time, the share of workers who are working part-time involuntarily (that is, they’d prefer full-time work) or who involuntarily lost their job both fell last month and are at about the same level that they were at a year ago.
Over 2007, employment gains have been concentrated among older workers. Workers aged 55 and over have added 725,000 jobs since January, while prime-age workers (aged 25 to 54) have lost 175,000 jobs and teens have lost 173,000. Workers aged 35 to 44 have seen especially sharp employment declines, losing 129,000 jobs last month. Over the past year, this age group has lost 0.9 percent of its jobs, while workers over age 55 have seen their employment rise by 4.2 percent.
Dean Baker is the Co-director of the Center for Economic and Policy Research.
CEPR’s Jobs Byte is published each month upon release of the Bureau of Labor Statistics’ employment report. For more information or to subscribe by fax or email contact CEPR at 202-293-5380 ext. 103 or or morgavan [at] cepr [dot] net.