Nation Maintains ‘Full Employment’ During August
The nation continued to steam ahead at “full employment” in August, but the economy created far fewer jobs, largely because of the Teamsters strike, the government reported Friday.
Labor Department figures showed that the overall unemployment rate edged up to 4.9% of the work force--essentially unchanged from 4.8% in July--marking the fifth month in a row it has been at 5% or below.
At the same time, however, the Teamsters strike against United Parcel Service took a visible toll on the number of new jobs created. Industry payrolls rose by only 49,000 in August, the worst performance since September 1996.
Nevertheless, analysts said the setback was only temporary, and the economy has already begun to bounce back from the two-week-long strike that impeded shipments across the nation.
Analysts estimated that if the walkout had not occurred, job growth in August would have weighed in at just over 200,000--well below the 365,000 new jobs created in June, but still a solid showing.
Economists were divided over whether the economy’s growth-rate may be slowing slightly--good news for those who feared that the unusually rapid pace might soon threaten to intensify inflation pressures.
David A. Wyss, economist for DRI/McGraw-Hill, one of the nation’s largest forecasting firms, said that, adjusted for the UPS strike, the job-creation figures still were strong by historical standards.
“We may be slowing down a bit, but we’re slowing down from what has been a very fast pace in the first half of the year,” Wyss said. He noted that output is still growing more rapidly than policymakers would like.
But Bruce Steinberg, chief economist for Merrill Lynch & Co., said fears that the economy may be overheating were misplaced. “Job growth has moderated even more than the headlines indicate,” he said.
Financial markets also gave the statistics a mixed reception.
After rising briefly Friday morning, the Dow Jones industrial average fell by 44.83 points to close at 7,822.41. Yields on 30-year Treasury bonds rose to 6.64%, from 6.61% on Thursday.
Analysts said traders were worried that there is still enough strength in the economy to prompt the Federal Reserve Board to raise interest rates--possibly by year-end--in an effort to dampen wage pressures.
The figures came as the White House forecast that last month’s budget deal with Congress will produce a federal budget surplus of $63 billion in fiscal year 2002--double that estimated by the Congressional Budget Office.
In a mid-year review, officials also confirmed that the budget deficit for the current fiscal year, which ends Sept. 30, will be $37 billion--the smallest since 1974 and $90 billion below previous forecasts.
The CBO forecast on Tuesday that the budget surplus in 2002 would be $32 billion, but warned that the current year’s deficit--which it pegged at $34 billion--could deepen to $57 billion next year.
However, both longer-term projections depend on a continued strong economy and the willingness of the White House and Congress to keep federal spending in line--assumptions that some analysts regard as uncertain.
If the budget agreement does hold up, it could produce the first balanced budget since 1969, and only the ninth since World War II. The forecasts envision more surpluses until 2007, when the baby boomers start to retire.
The August jobs figures marked the 15th month that the unemployment rate has been near or below the 5.3% mark that economists often cite as “full employment”--the point beyond which inflation pressures intensify.
The 4.8% rate recorded in July had marked a 24-year low.
Moreover, despite persisting fears--and tight labor markets across the country--recent statistics have shown that inflation still is in check, with little real evidence that either wage- or price-increases are accelerating.
The White House welcomed the new figures. Janet Yellen, chairman of the president’s Council of Economic Advisors, predicted the economy would “continue to create jobs and opportunities” in coming months.
The Teamsters strike against UPS took a double toll on the economy. By itself, the 15-day walkout kept 185,000 UPS workers off the job. It also interrupted other businesses, causing a ripple effect.
But Katharine G. Abraham, the commissioner of labor statistics, said those losses were offset by the fact that other shipping companies hired more workers to help them meet the increased demand for parcel deliveries.
As a result, she said, the net impact of the strike cost the economy only about 155,000 jobs, and even that was quickly offset when the Teamsters strike was settled on Aug. 19.
The UPS walkout depressed the August figures on the number of payroll jobs in the economy, because workers who are on strike are not counted as employed. Had there not been a strike, job growth would have hit 200,000.
The overall unemployment rate, however, is based on a survey of households, and was not affected by the walkout. Respondents who say they are on strike are counted as having a job.
Along with the other figures, Friday’s report showed continued gains among groups that traditionally have had high unemployment rates.
The jobless rate for blacks, for example, edged down to a 23-year-low of 9.3% in August, down from 9.4% in July and 10.4% in June. The rate for Latinos fell to 7.2% in August, down from 7.9% in July and 7.6% in June.
In one possible setback, the report showed that the average hourly earnings of rank-and-file production workers--a key indicator of wage hikes--rose by 0.4% in August, following a scant 0.1% increase in July.
However, analysts were divided over the implications of the pickup for the overall inflation picture.
