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Wages Continue Upward Trend

March 10, 2006 (Jobs Byte)

Jobs Byte

Wages Continue Upward Trend

March 10, 2006

By Heather Boushey 

Inflation-adjusted wages are growing, but are still lower than a year ago.

The economy added 243,000 new jobs in February and the unemployment rate inched up from 4.7 to 4.8 percent. Revisions to the establishment survey bring the net job creation from November to an average of 186,000 per month.
Wages are now growing sharply. The annualized rate of wage growth over the last three months is 4.8 percent, far outpacing inflation. Wage growth was especially strong for professional and business services (6.9 percent annualized growth), information services (5.6 percent), and natural resources (5.5 percent). Wage growth in wholesale and retail trade and leisure and hospitality is keeping pace with inflation, while in manufacturing and other services, annualized wage growth is far below inflation.

Employment gains were spread across industries. As usual, health care added jobs, as did leisure and hospitality services. Construction added 41,000 jobs last month, on top of 55,000 new jobs last month. Most of the job growth was in specialty contracting and residential specialty contracting. Some industries, however, are showing job losses. Retail still has 6,800 fewer jobs than it did in December and manufacturing lost 1,000 jobs last month, down by 48,000 for the year.

The automobile industry has been shedding jobs in recent months. Employment in motor vehicle and parts manufacturing fell by 10,600 in February, for a total loss of 28,000 jobs over the past year. At the same time, auto dealers have shed 16,500 jobs since July, as consumer demand for cars slowed in the fourth quarter.

The temporary help sector has been adding jobs fairly consistently since early 2003; however, since December, there has been a loss of 13,700 jobs. Even so, employment remains near the 2000 peak and these job losses may be due to firms hiring permanent staff instead of temps.

Hours have been steadily increasing since mid-2003, but stalled in February. Average hours worked dropped from 33.8, where it had been since September, to 33.7 hours per week. The index of hours worked—the total hours of all production or nonsupervisory workers—fell from 103.9 to 103.8. Severe weather in the Northeast during the reference period may have been a factor in this weakness.

Both the labor force and employment grew in February. The labor force participation rate edged up from 66.0 to 66.1 percent, but the share of the population at work remains unchanged at 62.9 percent, 1.8 percentage points below its peak of 64.7 in April, 2000.

The increase in the unemployment rate from 4.7 to 4.8 percent was driven by an increase in unemployment among men. The unemployment rate of men aged 20 and over had fallen sharply in January from 4.3 to 4.0 percent, but in February moved back up to 4.2 percent. Last month’s share drop in unemployment for African American workers to 8.9 percent was also reversed, rising back up to 9.3 percent, where it had been in December.

While the share of discouraged workers in the economy is down by 100,000 over the past year, there are still signs that workers are having difficulties finding jobs. The share of unemployed workers who have been out of work for at least six months shot back up to 19.0 percent in February, after falling in January to its lowest level since March 2002. The median worker spent 8.9 weeks unemployed, up from around 8.5 over the last few months.

There continues to be more women than men who are out of the labor force, but who report wanting a job. In February, there were over 2.7 million women out of the labor force but wanting a job, compared to 2.1 million men. Men, however, were more likely than women to have searched or to have been discouraged in their job search.

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. 

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