Jobs Byte 

Wages Continue to Trend Upwards

January 5, 2007 

By Heather Boushey

Growth in hours indicates falling productivity for the fourth quarter of 2006.

The establishment survey showed the economy adding 167,000 jobs in December, on top of upward revisions of 36,000 for October and November. Over the past three months, the average job growth was 136,000. Gains in employment continue to trend below the recovery of the 1990s, when the economy added an average of 224,000 each month.

Job gains were found in the service-producing industries. Transportation added 15,200 jobs (above its usual monthly average gain of 9,000), information added 12,000 jobs, and professional and business services added 50,000 jobs in December.

Job losses were spread across the goods-producing sector and manufacturing lost another 12,000 jobs in December, for a total of 72,000 for the past year. There was also a notable decline in employment in residential specialty trade contractors, who lost 10,000 jobs in December and 103,000 jobs over the past year. Other sectors with losses include transportation equipment (5,000 jobs), motor vehicles and parts (5,000 jobs), textile mills (2,000 jobs), retail trade (9,000 jobs), and building material and garden supply stores (8,000 jobs).

Hours grew at a 1.9 percent annual rate over the quarter and the index of aggregate weekly hours rose from 105.7 up to 105.9 over the past month. This is evidence of slowing productivity: if the Gross Domestic Product is growing at 2.5 percent, then productivity will be just 0.6 percent for the quarter.

While the establishment survey shows job losses in a number of key sectors, the household survey shows signs of a relatively tight labor market. The employment rate—the share of people at work—and the unemployment rate both were statistically unchanged in December, but continued to move towards a tightening labor market.

The employment rate was 63.4 in December and has risen 0.6 percentage points over the past year. However, the employment rate remains 1.3 percentage points below its peak in April 2000.

Wage growth has been outpacing inflation since September 2006. The annualized rate of nominal wage growth over the quarter was 3.9 percent. Inflation-adjusted hourly wages were flat during 2002 and 2003 and fell from 2004 through September 2006.

The number of discouraged workers is down sharply from this time last year. In December 2006, there were 274,000 workers who reported wanting a job, but not searching, while in December 2005, there were 451,000 such workers. The drop was sharper for women: there were 104,000 fewer discouraged female workers in December 2006, compared to a year ago, while there were 72,000 fewer discouraged male workers.

The length of time workers are spending unemployed is also falling and the share of the unemployed who are “long-term unemployed” (more than six months without a job) fell to 16.0 percent in December. However, the number of workers part-time for economic reasons is up by 49,000 from last month and by 99,000 compared to a year ago.

Lower unemployment is helping the least skilled to find jobs. Over the past year, less-educated workers have seen gains in employment. For workers without a high-school degree, the unemployment rate fell from 7.3 to 6.6 percent from December 2005 to December 2006, while falling from 2.2 to 1.9 for those with a college degree. The employment rate of workers without a high-school degree has risen by 1.7 percentage points over the past year, from 42.0 to 43.7 percent, while rising by 0.1 percentage point for those with a college degree, from 76.5 to 76.6.

There continues to be evidence that women were not voluntarily “opting out” of employment in the early 2000s, but that the weak labor market made it difficult for them to find jobs. The pace of employment growth has been greater for married women, compared to married men: over the past year, married women have gained 415,000 jobs, while married men gained 353,000.