March 4, 2005
More Wind in the Sails of Job Growth
While it’s not quite the job creation engine that it was in the late 1990’s, the new century U.S. economy is still one of the brightest stars on the global stage when it comes to growth. Last month’s strong employment gains, on the heels of upward revisions to overall growth and productivity, should put to rest any fears that the national economic expansion will be foundering any time soon.
According to the Bureau of Labor Statistics, payrolls at U.S. business establishments grew by a robust 262,000 workers in February, nearly double the number of net new jobs created in the previous month. Although gains in some sectors were rebounds from setbacks suffered in January, the strength in the economy shown by the February jobs report was broad-based.
Particularly strong was the hiring in theprofessional and business services industry nationwide, which added 81,000 jobs last month. There continues to be strong evidence that businesses are pushing ahead with expansion plans, with higher capital expenditures requiring more hiring of engineering and consulting services. There has also been strong hiring in temporary employment services, which are up by 207,000 jobs over the year.
Manufacturing employment, which rose by 20,000 jobs last month, remains mixed. The increases in factory hiring largely resulted from callbacks by auto manufacturers from January shutdowns. The most recent dour reports of motor vehicle sales, particularly from General Motors and Ford, do not hold much hope of further new hiring.
Overall, the uptick in the rate of new job creation in the national economy eases fears that the consumption-led economic expansion was running out of gas.
This comes on the heels of a pair of significant data revisions that took the edge off of what was previously thought to be bad news. Exports, which were once said to have fallen in the fourth quarter of 2004, were revised sharply upward by the Bureau of Economic Analysis, to show 2.1 percent growth. As a result, overall economic growth was also revised up fairly substantially for the year-end period. And productivity, which was once thought to have virtually stalled at the end of the year, was revised up to 2.1 percent for the year’s final quarter.
That’s good news for countries in the rest of the world, many of whom continue to count on the American economy to pump up their own growth.
That’s particularly so for Western Europe and Japan, whose economies actually shrank in the second half of last year. But as the U.S. savings rate scrapes bottom, trade deficits balloon, and the value of the dollar remains fragile, many have questioned how much longer the imbalance of growth can persist.
For the Indiana economy, the employment picture is less clear. The Department of Workforce Development released January employment figures for the state that showed a very respectable 15,300 job net increase over the previous month. At the same time, DWD released a revised December job estimate that put statewide employment at almost 30,000 jobs higher than was published previously.
Unfortunately, as of this writing, that is as much as we know. Comprehensive revisions to the last three years of state employment data, derived through a process known as re-benchmarking, are not yet available. When they do arrive, we will know whether the state’s miniscule 0.5 percent job growth over the twelve months of 2004 was real or a mirage.
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