Nation Adds Jobs in August
The nation’s economy continued to create a substantial number of jobs in August, even though it is growing more slowly now than it was last winter, the government reported Friday.
Although the figures were distorted by the return of workers idled by the General Motors strike, the nation’s payrolls still grew by some 215,000 jobs--about the same pace that they would have reached in July had the strike not interfered, the Labor Department said.
As a result, the overall unemployment rate remained at 4.5% of the work force for the third month in a row--the 14th consecutive month of sub-5% joblessness and the longest such streak since 1973.
While the news was good on one hand, it was likely to add to Federal Reserve Board worries that continuing tightness in the nation’s labor markets is threatening to spark a new round of inflation.
Besides the substantial increase in the number of new jobs, the department reported that average hourly earnings--a benchmark measure of wage pressures--rose by a strong 7 cents in August, to $12.86, or 4.2% above its level of a year ago.
The Fed has been worried about the continuing momentum in the economy, which it fears could soon lead to overheating. The Fed cites this as a key factor in its reluctance to cut short-term interest rates as a means of relieving the impact of the Asian economic slump.
Economists provided a mixed assessment of the August figures. Cynthia Latta, an analyst for Standard & Poor’s DRI, said that while the numbers showed that labor markets still are tight, “it’s starting to look as though the pace of job growth may be slowing a bit.”
But Bruce Steinberg, chief economist for Merrill Lynch & Co., asserted that the labor shortage--and its companion wage pressures--are “about to relax because the U.S. economy itself is set to slow further.”
The board’s policy-setting Federal Open Market Committee meets again Sept. 29.
In a speech Friday at UC Berkeley, Fed Chairman Alan Greenspan hinted that the board may be willing to cut interest rates in the wake of global market turmoil, contending that policymakers no longer view inflation as the primary threat.
The 215,000 increase in the number of new jobs did not include the impact of returning auto workers, estimated at about 150,000. When the auto workers are taken into account, the job-growth figure swelled to 365,000.
Despite strong performance on the job front, the report showed a worsening in the economy’s manufacturing sector, which has been hit hard by the collapse of Asian markets. Those countries had been major customers for American exports.
Although manufacturing industries added 95,000 jobs over the month, the bulk of the increase came from the return of idled auto workers. With the impact of the auto strike excluded, employment in manufacturing industries declined by 48,000.
Katharine G. Abraham, commissioner of labor statistics, said the falloff in manufacturing employment appears to be accelerating. The number of jobs in manufacturing industries has declined by 105,000 since June and by 152,000 since April.
Other sectors of the economy remained robust, however. The service-producing sector added 256,000 jobs in August, following a 254,000-job rise the previous month. Construction grew by 16,000 jobs after an 18,000-job increase in July.
But job growth in the finance, insurance and real estate sectors slowed, rising by just 13,000 jobs in August, down from 35,000 in July. Employment growth in retail trade also waned, growing by 16,000 jobs, following a 97,000-job increase in July.
Most analysts expect the tightness in labor markets to continue for several months, despite the recent slowing in the economy, steadily pushing up labor costs in a wide array of industries.
The pace of job creation has fallen off significantly since the economy began slowing in the spring quarter of this year. During the first eight months of 1998, payrolls have risen an average of 237,000 jobs a month--well below the 283,000-a-month average of 1997.
Nevertheless, job growth still is continuing at a respectable pace. Part of the reason it is causing so much worry is that, with so few workers now left without jobs, every big increase in job opportunities is that much harder to fill.
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U.S. Unemployment
Jobless rate, seasonally adjusted:
August: 4.5%
Source: Labor Department
