October 6, 2006 (Jobs Byte)
September Employment Data Show Signs of Slowing Economy
October 6, 2006
By Dean Baker
The establishment survey showed the economy adding just 51,000 jobs in September, considerably less than most estimates. However, the August job growth was revised up by 60,000, so employment levels are pretty much where analysts had predicted. Nonetheless, this report provides evidence of a slowing economy, consistent with other recent data.
The manufacturing sector provides the most grounds for concern, shedding 19,000 jobs in September. This was coupled with a decline of 0.2 hours in the length of the average workweek, which led to a 0.7 percent drop in hours worked in the sector. The losses in manufacturing were widespread across sectors, although textile mills, with a loss of 3,800 jobs, had the largest decline in percentage terms. This sector has lost 12 percent of its employment over the last year.
Construction employment continues to rise, with the sector adding 36,000 jobs over the last three months. This figure is striking, given that nominal construction spending is reported as having fallen by more than 1 percent from May to August. In the same vein, employment in the real estate sector is holding steady. Employment is still 2.1 percent above its year ago levels, even though sales are down by more than 10 percent, and nominal prices have fallen as well.
The retail sector also continues to shed jobs, losing 11,900 jobs in September, mostly due to a loss of 8,000 jobs in general merchandise stores. The temporary help sector lost 11,300 jobs. Employment in the sector is down by 21,000 from its May level.
There were few sources of substantial job growth. The health and education sector generated 15,000 jobs after growing by 67,000 jobs in August. The restaurant sector added 15,000 jobs, bringing jobs gains over the last three months to 66,000.
Wage growth appears to be continuing at a moderate pace. With wage growth having been revised up slightly for August, the annual rate of growth over the last quarter has been 3.9 percent, almost identical to the 4.0 percent rate over the last year. With oil prices now moving downward, this should allow for some modest real wage growth.
The data in the household survey is consistent with a picture of a labor market that remains relatively strong. The unemployment rate was virtually unchanged at 4.6 percent, with the measures of unemployment duration drifting down slightly. By demographic group, the unemployment rate for white men fell to 3.3 percent, its lowest level since May of 2001. The unemployment rate for people without high school degrees fell to 5.9 percent, the lowest level since December of 2000.
The data show that employment gains continued to be concentrated among older workers. People over age 55 accounted for 55.6 percent of employment growth since May. Employment is actually down by 0.8 percent over the last year for workers between the ages of 35 and 44. This drop is roughly evenly divided between men and women in this age group.
An interesting item in this release is the preliminary report of a benchmark revision to the establishment survey of 810,000 additional jobs as of March of 2006. This is an extraordinarily large revision. It would imply that job growth was considerably faster over the year from March of 2005 to March of 2006 than had previously been reported. This revision would also imply that productivity growth has been considerably slower, causing the reported 2.7 percent rate of productivity growth over this period to be revised down to approximately 2.1 percent. This would be a substantial slowdown from the 3.4 percent rate over the prior four years.
In sum, the September report shows weakness, most notably in manufacturing, retail trade, and temporary employment, but it also shows surprising strength in the housing related sectors. With housing data showing a sharp downturn, it is implausible that employment in the sector will not soon be affected. Given that employment elsewhere is already weak, when the downturn in the housing related sectors begins to show up, the prospects for employment will be bleak.
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.