High January Job Figures Baffle Experts

The seemingly irrepressible U.S. economy, barreling into the new century, added an unexpectedly high 387,000 jobs in January, the Labor Department said Friday.

The increase in jobs helped push the unemployment rate down to 4.0%, the lowest level of the current boom and also the lowest rate since 1970. Businesses added workers at the fastest pace in more than two years. And other government measures of employment, such as the ratio of jobholders to the overall population, reached record highs.

At the same time, the Labor Department reported that average wages grew at an annual rate of 3.5% in January, or slightly less than in most of 1999 and 1998. Continued moderate wage growth at a time of such low unemployment is out of sync with historic patterns in the U.S. economy, and it left many observers marveling.

“These numbers are amazing,” said Maureen F. Allyn, chief economist for Scudder Kemper Investments in New York. “They’re so incredibly strong, and there’s still not a particularly worrisome amount of inflation. You just sit there scratching your head and wondering how we could do this.”

The strong need for workers was evident in most sectors of the economy. About 152,000 new service jobs were filled in January, far more than the average monthly gain of 121,000 such jobs last year. And construction, a part of the economy that normally slows in direct response to interest-rate increases, showed a gain of 116,000 workers in January, despite the Federal Reserve’s recent series of rate increases. January marked the biggest monthly rise in construction employment since February 1984.

At least part of the growth in construction was apparently due to unusually warm weather at the time the Labor Department was gathering its data. Some of the greatest employment gains appeared in the cement, masonry and roofing trades, all areas in which workers labor outdoors.

And 11,000 of January’s new jobs in the public sector were likewise the result of onetime seasonal factors: The government is gearing up to take the 10-year census, and it started hiring survey-takers in January.

Still, there was plenty of evidence of other, broader-based and more potentially lasting growth in January. Even manufacturing, a sector of the economy that has suffered massive employment declines in recent years, showed signs of being on the mend. About 13,000 new manufacturing jobs were filled in January after two months of no employment growth and a long run before that of job losses. Oil and gas extraction also showed modest gains after having lost 68,000 jobs from March 1998 to June 1999.

One sobering spot in the glowing January job data: Not all demographic groups profited from the month’s easy availability of jobs. Though unemployment fell from December’s 4.1% for the population as a whole, it rose slightly for women to 4.2%. The Labor Department’s racial breakdown showed that unemployment for Latinos fell to 5.6%, its lowest level since the department began tracking this rate in 1973. It also fell for black male teenagers, who usually have the highest unemployment rate of any group the department follows, but it rose for older black men and for black women of all ages.

Most analysts had been expecting the economy to add about 265,000 jobs during January, and even that underestimate would have been a substantially faster rate of employment growth than U.S. demographic trends alone would indicate. America’s birthrates, immigration patterns and other social forces suggest that about 150,000 workers should be entering the work force each month.

Ken Mayland, chief economist at KeyCorp, a financial services company in Cleveland, said the news that the economy is somehow filling twice that many jobs offers new grist for the long-running debate on whether the economy is running out of workers.

For months, businesses have been complaining that it is hard to find qualified workers, and analysts have been wondering whether companies will soon have to start bidding up wages, triggering inflation.

“How can we be running out of workers if for two months in a row we’ve been adding more than 300,000 of them?” Mayland asked, recalling that in December, 316,000 jobs were created. “This is a tough question for the people who say we’re running out of workers.”

Difficult though it may be to find suitable people to hire, Mayland said he believes businesses are filling vacancies from the ranks of teenagers, homemakers, returning retirees and others who wouldn’t be working if it weren’t so easy to get hired. As long as the labor market can attract such newcomers, he said, wages won’t be dangerously bid upward.

But Paul L. Kasriel, chief economist at Northern Trust Co. in Chicago, said he suspects there may already be wage pressures in the U.S. labor markets that Friday’s relatively narrow wage-gain measure did not pick up.

“This measure happens to be the least inclusive of all the measures we have,” he said. “It only includes workers paid by the hour.” Missing, he said, are supervisory people and many white-collar workers and all the hiring bonuses, retention bonuses, stock option perks and other non-wage payments they are enjoying in the current go-go environment.