Job Growth Still Lowest of the Last 40 years
by Bonddad, Fri Jun 02, 2006 at 05:10:00 AM EDT
Nonfarm employment edged up in May (+75,000), and the unemployment rate was little changed at 4.6 percent, the Bureau of Labor Statistics of the U.S. Department of Labor reported today. Employment continued to trend up in some service-providing industries and in mining, while retail trade and manufacturing lost jobs. Average hourly earnings were up by 1 cent in May following a gain of 10 cents in April.
The 75,000 gain in payrolls followed a revised 126,000 April increase that was lower than the government initially reported, Labor Department figures showed today. Economists expected a 170,000 increase. The unemployment rate fell to 4.6 percent last month from 4.7 percent.
A weakening of the labor market may make it harder for workers to demand pay increases. Smaller wage gains help reduce the risk of inflation and provide leeway for those Federal Reserve policy makers leaning toward an end to two years of interest-rate increases.
Economists expected payrolls to rise by 170,000, according to the median of 79 forecasts in a Bloomberg News survey, after an originally reported 138,000 gain in April. Estimates of the increase ranged from 125,000 to 250,000.
According to the national Bureau of Economic Research, this expansion started in November 2001 - not 2003 as the Bush spin team continually asserts in their employment reports. There were 130,883,000 jobs in the US in November 2001 and 135,106,000 in May 2006 for a total gain of 4,223,000. That's a compound annual growth rate of .70% -- and a full 1 million jobs less than the Bush administration's public claims.
The second weakest compound rate of establishment growth occurred in the 1990s, whose compound growth rate was 1.8% -- 2.5 times higher than the "Bush job machine."
Weak job growth and lower quality jobs have led to weak wage growth. According to the Bureau of Labor Statistics, the average hourly wage of production workers was $14.70 in November 2001 and $16.61 in April 2006 for an increase of 13%. Over the same period, the overall inflation index increased from 177.4 to 201.5 for an increase of 13.58%. This makes the inflation-adjusted wages for production workers -.5% for this expansion.
Finally, the general emerging consensus is the economy will slowdown in the second half of 2006. Considering the 16 straight Federal Reserve rate hikes and the slowing housing market, this seems to be a safe bet. Therefore it is highly unlikely we will see a major improvement in either the employment or wage situation.