4.3% job­less rate still may im­prove

As U.S. econ­omy grows, more peo­ple are com­ing off side­lines to find work.

Austin American-Statesman - - FRONT PAGE - By Christo­pher Ru­gaber

A drop in the un­em­ploy­ment rate to a 16-year low raises a tan­ta­liz­ing ques­tion about the job mar­ket: How much bet­ter can it get?

Ear­lier this year, econ­o­mists wor­ried that the low un­em­ploy­ment rate meant busi­nesses would strug­gle to find work­ers and that would drag down the pace of hir­ing. Those fears were height­ened by a tiny job gain in March and mod­est hir­ing in May.

Yet, Fri­day’s jobs re­port sug­gests such con­cerns are pre­ma­ture. Em­ploy­ers added 209,000 jobs, af­ter a solid gain of 231,000 in June, the Labor Depart­ment said. The un­em­ploy­ment rate ticked down to 4.3 per­cent, from 4.4 per­cent, match­ing the low reached in May.

The U.S. econ­omy is ben­e­fit­ing from steady growth around the world, with Europe and Ja­pan perk­ing up and China’s econ­omy sta­bi­liz­ing. Cor­po­rate rev­enue and profits are grow­ing too, and the stock mar­ket has hit record highs. On Fri­day, the the Dow Jones in­dus­trial av­er­age rose 66.71 points, or 0.3 per­cent, to 22,092.81 — its ninth gain in a row.

Econ­o­mists were par­tic­u­larly

en­cour­aged by the fact that more Amer­i­cans are com­ing off the side­lines and find­ing jobs. For the first few years af­ter the re­ces­sion, many of the un­em­ployed stopped look­ing for work.

Some were dis­cour­aged by the lack of avail­able jobs. Oth­ers re­turned to school or stayed home to take care of fam­ily. The gov­ern­ment doesn’t count those out of work as un­em­ployed un­less they are ac­tively search­ing for jobs.

That trend be­gan to re­verse last year and has con­tin­ued into 2017. To many econ­o­mists, that means ro­bust hir­ing could con­tinue for many more months, or even years.

“There’s more peo­ple will­ing to work than the un­em­ploy­ment rate would have you be­lieve,” said Nick Bunker, a se­nior pol­icy an­a­lyst at the Wash­ing­ton Cen­ter for Eq­ui­table Growth, a lib­eral think tank.

Pres­i­dent Don­ald Trump cel­e­brated the data in a tweet shortly af­ter the num­bers were re­leased.

“Ex­cel­lent Jobs Num­bers,” he wrote, “and I have only just be­gun.”

The pace of hir­ing so far this year, while solid, is pretty much the same as it was last year un­der Pres­i­dent Barack Obama. Em­ploy­ers have added an av­er­age of 184,000 jobs a month through July, com­pared with 187,000 in 2016. Monthly job gains topped 200,000 on av­er­age in 2014 and 2015.

The steady hir­ing is adding up. In July, the pro­por­tion of Amer­i­cans ages 25 through 54 who had a job or were look­ing for one rose to 81.8 per­cent, up a half-per­cent­age point from a year ear­lier and the high­est since De­cem­ber 2010.

Econ­o­mists fo­cus on that age group be­cause it fil­ters out the im­pact of re­tire­ments by the huge baby boomer gen­er­a­tion and ex­cludes younger work­ers who are more likely to be in school.

That means more Amer­i­cans are op­ti­mistic about the job mar­ket and launch­ing job searches. But that pro­por­tion is still sub­stan­tially lower than the all-time peak of 84.6 per­cent, reached in Jan­uary 1999.

There’s no way to know whether that peak could be reached again. Many econ­o­mists are doubt­ful, in part be­cause it rose sharply in the 1980s and 1990s as women flooded the work­force. The pro­por­tion of women work­ing or look­ing for work has slipped since 2000.

Based on his­tor­i­cal trends, the share of work­ing-age Amer­i­cans who ei­ther have jobs or are look­ing for one could rise an­other 0.7 per­cent­age point. That would cre­ate 1.8 mil­lion more jobs, ac­cord­ing to An­drew So­journer, an econ­o­mist at the Univer­sity of Min­nesota.

Robert May­nard, CEO of Fa­mous Toast­ery, a 22-restau­rant chain based in Char­lotte, N.C., still is look­ing to hire. He plans to add 10 more res­tau­rants later this year, which should cre­ate about 250 full-time jobs.

At the same time, he said, other res­tau­rants also are ex­pand­ing and some are even peel­ing away his em­ploy­ees by of­fer­ing higher pay. He’s re­sponded by boost­ing wages 10 to 15 per­cent.

“We’re fight­ing to get the best work­ers,” he said.

Res­tau­rants and bars added a mas­sive 53,100 jobs in July, roughly a quar­ter of all the job gains that month. And restau­rant em­ploy­ees are see­ing their pay rise faster than other work­ers. Av­er­age hourly pay in the in­dus­try jumped 4.7 per­cent in June from the pre­vi­ous year, the lat­est data avail­able.

That com­pares to just 2.5 per­cent for all work­ers. Slug­gish wage growth has been a per­sis­tent weak spot in the re­cov­ery. Wage gains are typ­i­cally closer to 4 per­cent a year with the un­em­ploy­ment rate this low.

Some econ­o­mists think it may be harder to pull many more work­ers off the side­lines.

A large pro­por­tion of those who aren’t look­ing for work say they are dis­abled or ill. Some re­search in­di­cates many are ad­dicted to painkillers, noted Jed Kolko, chief econ­o­mist for In­deed, a job list­ings web­site.

“They’re the kinds of rea­sons that might not be over­come with slightly higher wages,” Kolko said.

“It’s re­ally hard to know what it would take to get peo­ple who have left the labor force to come back.”

Many econ­o­mists ar­gue that de­mo­graph­ics will even­tu­ally limit how much more hir­ing can hap­pen. The U.S. pop­u­la­tion is ag­ing and pop­u­la­tion growth has slowed in the past two decades.

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