Job growth

The Washington Times Weekly - - Editorials -

De­spite down­turns in the hous­ing and auto sec­tors, busi­nesses added 167,000 jobs to their pay­rolls in De­cem­ber. End­ing the year on a high note, the monthly in­crease was about 50 per­cent more than ex­pected. Judged by the his­tor­i­cal record and by the cur­rent ex­pe­ri­ence of most other in­dus­tri­al­ized coun­tries, the De­cem­ber un­em­ploy­ment rate was an en­vi­able 4.5 per­cent. Av­er­age nom­i­nal hourly wages for pro­duc­tion work­ers and non­super­vi­sory em­ploy­ees (80 per­cent of the private-sec­tor work force), in­creased a solid 0.5 per­cent last month. Even more im­por­tantly, through Novem­ber, av­er­age in­fla­tion-ad­justed hourly wages for th­ese work­ers had in­creased an im­pres­sive 2.5 per­cent over the last 12 months.

For the year, non­farm pay­rolls in­creased by 1.84 mil­lion jobs, or 153,000 per month. The un­em­ploy­ment rate av­er­aged 4.6 per­cent in 2006, down from 6 per­cent in 2003, 5.5 per­cent in 2004 and 5.1 per­cent in 2005. By way of com­par­i­son, the latest un­em­ploy­ment rates in Europe are 5.5 per­cent (Bri­tain), 8.7 per­cent (France) and 9.8 per­cent (Ger­many).

Worth not­ing is the fact that U.S. pay­rolls grew faster dur­ing the sec­ond half of 2006 (963,000 jobs) than they did dur­ing the first half (875,000 jobs). Con­sid­ered a co­in­ci­dent eco­nomic in­di­ca­tor, non­farm­pay­rolls mea­sure how the econ­omy is per­form­ing at that mo­ment. The ad­mit­tedly mild ac­cel­er­a­tion of em­ploy­ment growth for the July-De­cem­ber pe­riod could sig­nal that the Fed­eral Re­serve is on track to­ward achiev­ing its goal of a “soft land­ing.” Ac­cord­ing to this sce­nario, the econ­omy would tem­po­rar­ily slow down from the 4.2 per­cent an­nu­al­ized growth rate that pre­vailed dur­ing the 12 quar­ters end­ing in March 2006. Af­ter catch­ing its breadth (the “soft land­ing”), the econ­omy would re­sume grow­ing at its long-term po­ten­tial, which most economists be­lieve to be about 3 per­cent per year.

From an an­nu­al­ized growth rate of 5.6 per­cent in the first quar­ter of 2006, the pace of U.S. eco­nomic growth slowed to 2.6 per­cent and 2 per­cent dur­ing the sec­ond and third quar­ters. Not­with­stand­ing stel­lar stock-mar­ket gains (a lead­ing eco­nomic in­di­ca­tor), which have been un­der­girded by solid growth in cor­po­rate prof­its, the dreaded “R-word” had be­gun to make its ap­pear­ance in re­cent months. For­tu­nately, the in­crease in ser­vice jobs con­tin­ues to more than com­pen­sate for de­clines in man­u­fac­tur­ing and con­struc­tion em­ploy­ment.

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