Warm Spell Heats Up February Job Figures
February’s unusually warm weather across most of the nation produced a boom in construction jobs, helping trim the U.S. unemployment rate to 5.3%, down from 5.4% in January, the Labor Department reported Friday.
Total payrolls rose by 339,000 jobs, the largest monthly increase since May and a robust figure that might ordinarily raise fears of an overheated economy. But because an estimated 109,000 of the month’s new jobs came in construction and were mostly linked to the unseasonably mild conditions, many experts agreed that the actual job trend remains one of steady expansion without any serious threat of either labor shortages or rising prices. Hourly wages showed a smaller-than-expected increase last month.
“The economy is doing well . . . and there is no immediate threat of inflation,” said Lyle Gramley, chief economist for the Mortgage Bankers Assn. and a former member of the Federal Reserve Board.
He predicted that the Fed’s open market committee, which decides whether to raise or lower interest rates, will stand pat at its meeting later this month. The Fed “feels it has time to wait a bit, watch and see what develops,” Gramley said.
That was good news for Wall Street, which pushed the Dow Jones industrial average up 56.19 points to 7,000.89, the blue chip barometer’s first move past 7,000 in more than a week. U.S. bonds also rallied on the news. The price of the benchmark 30-year Treasury bond posted the biggest one-day gain in three weeks Friday, pushing its yield down to 6.81% from 6.88% Thursday.
The nation is “looking at continued moderate growth,” said Dean Baker of the Economic Policy Institute, a liberal think tank. Policymakers don’t have to worry about inflation because “there is just no evidence that wages are somehow getting out of hand,” he said.
Hourly wages rose 3.7% last year, but after adjustment for inflation, the increase in buying power was a scant 0.6%, according to the Bureau of Labor Statistics.
The stock market became uneasy last summer after a couple of monthly reports showed unusual increases in wages, but the Fed declined to act and “that was the right move,” Baker said.
Average hourly earnings rose 3 cents last month to reach $12.09.
Friday’s report offered “good news for American workers,” said Rep. Jim Saxton (R-N.J.), chairman of Congress’ Joint Economic Committee. “The data reflect the continuation of the economic expansion that began in 1991.”
But some economists said Friday that the Fed may still decide to make a preemptive strike against inflation by raising interest rates slightly at the central bank’s March 25 meeting--especially if additional data suggest the economy is gaining steam.
February’s gain of 339,000 jobs, which was higher than expected, compared with a revised figure of 247,000 for January.
“The magnitude of February’s increase can be attributed largely to mild weather across much of the country, following unusually severe weather in January,” labor bureau Commissioner Katharine G. Abraham told the joint economic panel during its regular monthly hearing on the jobs report.
In addition to the construction gains, the economy picked up 49,000 new jobs in retail trade, featuring a large gain in department store payrolls.
Some service businesses “had notable job gains in February, including computer and data processing services and engineering and management services,” Abraham said.
Finance and real estate employment enjoyed “steady” expansion, she noted.
The labor bureau report indicated there were 128.4 million Americans working last month, and 7.2 million unemployed.
The jobless rates for major groups included: women, 4.7%, up from 4.6%; men, 4.4%, down from 4.6%; whites, 4.5%, down from 4.6%; blacks, 11.3%, up from 10.8%, and Latinos, 8.1%, down from 8.3%.
At the committee hearing, Saxton quizzed Abraham extensively about potential changes in the consumer price index, which is used as an inflation measure to provide the annual raise for Social Security beneficiaries. It also is used to adjust the federal income tax brackets.
The Clinton administration and some members of Congress are studying ways to alter or adjust the index to help balance the federal budget. An independent commission said last year that the index annually overstates inflation by 1.1 percentage points. That would mean that when the index is 3%, for example, the true inflation rate is estimated to be 1.9%.
The adoption of a revised formula could generate $1 trillion for the government over a decade by reducing the growth in benefit payments and raising taxes.
“I urge restraint on this issue,” said Saxton, noting that “the House leadership wants to go slow” before making any changes that would mean smaller benefit checks for Social Security recipients and higher taxes for every worker.
Saxton’s skepticism was shared by a Democratic member of the committee, Maurice Hinchey of New York, who said any change should be “something we ought to do very carefully and deliberately.”
