November 3, 2006 (Jobs Byte)
Government Hiring Helps Tighten Labor Market
November 3, 2006
By Heather Boushey
Data released today by the Bureau of Labor
Statistics point to a tightening labor market, although job growth is
slowing. The economy added 92,000 new jobs in October. Over the past
three months, the economy has added an average of 157,000 new jobs each
month. While revisions to the data added a total of 181,000 new jobs in
August and September, nearly half of that (84,000) was in government.
The household survey shows a tightening labor
market. In October, the unemployment rate fell to 4.4 percent and the
employment rate rose to 63.3 percent. The employment rate is at its
highest rate in five years, but remains 1.4 percentage points below its
peak in April of 2000. Workers with less than a high-school degree saw
their unemployment rate fall from 6.4 to 5.8 percent. While this is
only a one-month change, it does bring unemployment for this group down
to its lowest level since 1999.
Another sign of a tight labor market is that the
share of workers who have been out of work and searching for a job for
at least six months fell from 18.2 to 16.0 percent, the lowest rate in
four and half years. The number of discouraged workers (those who are
not in the labor force, but would like to work) is down by 61,000 over
the past year.
Job gains were strong in the health care industry,
which added 23,000 new jobs last month, and professional and business
services, which added 43,000 new jobs last month. Much of the job gains
have been due to government hiring. Government employment has risen by
131,000 since June.
While most industries had moderate
job gains in October, a few industries are losing jobs. Construction
job growth has been flat throughout 2006 and lost 26,000 jobs in
Residential specialty trade construction has seen sharp job losses; it
lost 31,000 jobs last month and 57,000 jobs over the past year. There
were 39,000 jobs lost in manufacturing with a significant share of the
job losses in motor vehicles and parts, which lost 15,000 jobs last
month, and rubber (tires), which lost 13,800 jobs.
Another sign of potential weakness in hiring in the
months to come is that the temporary help sector, which is often seen
as an indicator of future permanent hiring, has been flat for the past
year. It added 15,000 jobs in October, but this only brings it close to
its employment level of last November.
Wages grew by $0.06 in October. The annual rate of
nominal wage growth over the last quarter is 4 percent, which means
that workers are seeing inflation-adjusted wage gains. This is likely
to cause concern at the Federal Reserve given the weak productivity
data released yesterday. While employers are paying out more in wages,
they are not seeing commensurate gains in output, which implies either
lower profits or higher prices.
Most groups of workers are showing employment gains.
The employment rate for women over age 20 increased from 58.0 percent
to 58.2 percent last month, while the employment rate for men over age
20 fell from 73.1 to 73.0 percent. Both men and women have seen their
employment rate grow by 0.4 percentage points over the past year.
Young workers, however, are not showing employment
gains, relative to older workers. Over the past year, while employment
grew overall, workers aged 20 to 24 lost nearly one percent of their
employment and workers over age 25 saw an increase in employment of
over 2 percent.
This is the final month of data collection on the
employment of evacuees from Hurricane Katrina. In October, the
unemployment rate for Katrina evacuees jumped from 8.3 to 11.0 percent.
Unemployment remains very high for evacuees who have not returned home,
jumping from 14.5 to 17.9 percent. For those who have returned, the
unemployment rate increased from 4.7 to 7.0 percent.
Heather Boushey is senior economist at the Center for Economic and Policy Research in Washington, DC
CEPR’s Jobs Byte is published each month upon
release of the Bureau of Labor Statistics’ employment report.