July 8, 2005 (Jobs Byte)
Employment Growth Continues at Moderate Pace
July 8, 2005
By Heather Boushey
Employers added 146,000 jobs last month, and upward revisions to employment gains in April and May totaled 62,000, yielding an overall job increase of 208,000. Meanwhile, the unemployment rate fell 0.1 percentage points, to 5.0 percent.
Over the past four months, the economy has added an average of 166,000 jobs per month. During the expansion of the 1990s, from 1993 through 1999, the economy added an average of 251,000 jobs each month, more than 50 percent higher than the current pace of job growth.
The distribution of employment gains in June were mixed and many industries showed little or no employment gains. Transportation and warehousing added 200 new jobs, far below the previous three-month average of 13,600. Retail added 2,000, about one-sixth of the previous three-month average of 12,600 jobs. The prior three-month average is less than half the average retail job growth during the 1990s expansion.
The strong gains in employment were in construction (18,000), financial services (16,000), professional and business services (56,000), and education and health services (38,000). For construction, employment gains in June were less than the average monthly gain for 2004, but for the other three industries, employment gains outpaced the 2004 average.
The temporary help sector added 8,800 new jobs, after losing 500 jobs in May. Still, the rate of growth of temporary jobs is far below that of the 1990s, when the economy was adding about 16,000 new temps each month.
Average weekly hours held steady at 33.7 hours per week in June, after falling from 33.8 in April. The index of aggregate weekly hours-a measure of the total hours worked by all production and non-supervisory employees-increased by 0.2 percentage points, up to 102.5. This is the highest this index has reach since May 2001, just after the recession began, but remains 1.4 percent lower than the pre-recession peak of 103.9 in October of 2000.
The slow rate of job growth in temp sector combined with the lack of growth in hours indicate that employers are not in need of additional workers, which may indicate slow employment growth in coming months.
After holding steady for the last two months, an additional 34,000 workers reported involuntary job loss in June, over May. As a share of the unemployed, job losers moved back up to 49.7 percent, up from 47.5 percent in May and 47.9 percent in April. June's increase is attributable to a higher proportion of the unemployed reporting temporary layoff in June. This is only a one-month reversal of the prior trend however, so it should be interpreted cautiously.
The share of unemployed workers who have been out of work and searching for a job for at least six months fell, from 20.1 to 17.8 percent. This is the first time since October 2002 that this share has dipped below 20 percent. The average number of weeks that workers spend unemployed also showed a large drop, from 18.8 to 17.1 weeks. These are notably large declines, but given that they reflect a one-month change, they should be interpreted with caution.
Wage growth continues to lag inflation. Over the past quarter, the annualized rate of growth was 2.8 percent, while inflation was at 4.4 percent. Nominal annualized quarterly wage gains are particularly low in construction (1.7 percent), retail trade (1 percent), transportation and warehousing (1.5 percent), utilities (0.3 percent), and financial activities (1.4 percent). The lack of wage gains is surprising, given evidence of a tightening labor market.
Older workers have continued to capture the largest share of employment gains. Workers 55 and over, who currently make up 17 percent of the labor force, gained 120 percent of the new jobs last month, while workers 25 to 34, 22 percent of the labor force, lost 109 percent of employment. Over the past year, workers 55 and over have accounted for 59 percent of the employment gains, while those 25 to 34 have gained only 29.3 percent of the job growth.
The labor force participation rate fell by 0.1 percentage points last month, but the employment rate held at 62.7 percent, 0.4 percentage points above its level in February.
Heather Boushey is an economist at the Center for Economic and Policy Research in Washington, D.C.
CEPR’s Jobs Byte is published each month upon release of the Bureau of Labor Statistics’ employment report.