Economy Adds a Surprising 705,000 Jobs
Behind Friday’s chaos on Wall Street was this stunningly upbeat report: The nation’s employers added 705,000 jobs in February, providing dramatic testimony that the U.S. economy is healthier than was generally believed.
The government’s new figures--showing the biggest monthly gain of jobs in 13 years--dispelled recent worries that the nation might be sliding into a recession. The broad-based job gains also brought down the nation’s unemployment rate to 5.5%, from 5.8% in January.
“This economy is not in any kind of trouble,” said Lyle Gramley, chief economist of the Mortgage Bankers Assn. and a former member of the Federal Reserve Board.
Even so, questions remain about the quality of the jobs created and the overall momentum of the economy. Experts cautioned that many of the new jobs cited in Friday’s report were temporary or low-paying, and that the latest figures probably overstate the amount of employment growth that the nation enjoyed in February.
Other indicators--from the thousands of high-paying positions that continue to be slashed at leading U.S. corporations to the skimpy wage gains extracted by workers--also suggest that the health of the job market is, at best, uneven. After a sour January, when wintry weather led to the loss of 188,000 jobs, and then the huge rebound in February, analysts said it will take further data to clarify where the economy is headed.
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Nevertheless, Friday’s job report--showing job growth of more than twice what had been predicted--stunned analysts. It was “a hell of a lot more than I expected,” said Dean Baker of the Economic Policy Institute, a liberal think tank in Washington.
“I think that we constantly underestimate where we are in this economy,” added Barry Rogstad, president of the American Business Conference, a group of high-growth firms.
But the mixed picture of the job market was highlighted by the sharp rise in the number of temporary jobs. These jobs, economists say, often pay poorly and offer no benefits or job security. On the other hand, they sometimes lead to permanent employment and provide a reentry into the labor market for many workers.
Take, for example, Carmen Donowho, 26, who recently moved to Los Angeles from Pennsylvania after her husband accepted a job transfer to the area.
She applied for a temporary position in late February and got an assignment in less than a week as an administrative assistant for a life insurance company. Compared with her last job in the East handling insurance billing for a medical practice, Donowho said the new position is “much better--more money, more everything.”
At Appleone Employment Services in Beverly Hills, branch manager Kimberly Preston said she has seen a substantial increase in the number of firms offering permanent jobs to temporary workers placed by her agency.
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With employers’ worries about the economy easing, Preston said, “their fear of committing to an employee is dissipating.”
Friday’s report also included two other signals of future job growth: Both overtime hours and the length of the factory work week rose. At the same time, there was no sign of wage inflation. With February’s drop in hourly earnings, average pay is up a scant 2.6% over the past year.
Taken together, analysts said, these indicators shatter the theory that the economy has a “natural” rate of unemployment at 6%, which can be reduced only at the risk of steeply higher prices.
The economy is working differently than it did in the 1970s and 1980s, “and constraints [possible shortages of labor or factory capacity] are not as tight,” said Gramley. The jobless rate can fall below 5.5% “without triggering a burst of inflation,” he said.
But analysts said Federal Reserve Chairman Alan Greenspan, a determined inflation fighter, would resist cutting interest rates in the wake of the latest news. The jobs surge reported Friday “clearly means there will not be a rate cut, at least not in March,” said John O. Wilson, Bank of America’s chief economist.
On the other hand, many economists remained skeptical of the report, suggesting that faulty statistical adjustments may have inflated the estimated rise in employment. “I don’t think anybody believes there’s as much strength as this indicates,” said David Hensley, a regional economist with Salomon Bros. in New York.
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Hensley and other economists said the reported gain of 121,000 jobs in construction was particularly suspect, given the comparatively sluggish figures for such other industry gauges as new housing starts.
They noted that one of the other leading job gainers in the economy last month, retailing, is known for its generally low wages. In fact, average hourly earnings fell one cent to $11.65, and the number of workers involuntarily working part time jumped by 432,000.
Baker pointed out that the percentage of unemployed workers who chose to leave their jobs--ostensibly because they felt confident they would find better work elsewhere--was unusually low.
“People are scared,” Baker said.
In addition, the relatively high-paying manufacturing sector added a modest 26,000 jobs in February, recovering barely over one-third of the jobs lost in January and 265,000 lower than a year ago.
February’s numbers show “we have sidestepped the danger of a recession,” said Jerry Jasinowski, president of the National Assn. of Manufacturers. “Nonetheless, we are not out of the woods yet.”
President Clinton was quick to claim credit on Friday for the job growth.
“Four years ago, I said if America met its economic challenge by bringing down the deficit, investing in education and training, rewarding work and opening markets, we could spur a strong recovery that could help this economy create 8 million jobs in four years,” he said in a statement issued from Air Force One en route to California. “Our economy has created more than 8 million jobs in just three years instead of four.”
The job gain in February in the survey of business payrolls was the biggest increase in a single month since September 1983, when employment grew by 1.1 million as the country was emerging from a major recession.
At 5.5%, the nation’s jobless rate is back to where it stood in October.
Unemployment among whites fell to 4.9% from 5%. Among blacks, the rate declined to 10.3% from 10.6%, while unemployment among Latinos rose to 9.7% from 9.2%.
Rosenblatt reported from Washington and Silverstein from Los Angeles. Also contributing to this story was Times staff writer Ealena Callender in Los Angeles.
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