January 7, 2005
Job Growth Sure Beats the Alternative
It’s good to have job growth in the U.S. economy once again, even if the monthly gains in employment reported by the Bureau of Labor Statistics occasionally fall short of some analysts’ expectations. After a long spell of miniscule job growth in the wake of a painful recession, we’ve grown used to disappointing announcements from the Federal statistical agency responsible for tracking the labor market. But the recent report on the employment situation in December caps a year-long streak of monthly job gains that have averaged a healthy 186,000 jobs per month.
The 157,000 job gain posted in December for the U.S. economy followed a familiar pattern, with almost all of the gains coming in the services producing side of the economy. Particularly strong were the gains inprofessional and business services industries, which have added 546,000 jobs in the last twelve months. Those gains reflect strong increases in computer and engineering services, as well as a healthy rebound in the temporary help industry.
Other notable contributions to job growth were made by the health care, transportation and warehousing, and constructionindustries. Although December was a slow month for the building industry, its 371,000 job rebound from its low point in March 2003 has moved in step with the resurgence of business spending and corporate profits.
Manufacturing’s contribution to the economy’s overall job gains was of a different sort. By simply maintaining its payrolls, rather than shedding workers at the rate of previous years, the nation’s manufacturing companies helped push job growth into the black. The factory economy actually managed to grow by an average of about 6,000 jobs a month in 2004, which was considerably better than the 58,000 average monthly job loss of the preceding two years, as well as the 122,000 monthly loss in manufacturing jobs experienced in the recession year 2001.
So why don’t we feel better about the economy? Maybe that’s a question we should be asking our therapists. But as an economist, let me take a stab at it anyway.
To those of us who believe in the power of the media to influence our thinking, I suppose, the answer is easy. But are we really worried just because we hear bad news? News reporting has always been dominated by the negative, in good times and bad.
And there are more specific reasons to be less than jubilant right now. For one thing, the recovery from the 2001 recession has left us plenty of unpaid bills, especially in the public sector. States like Indiana face large budget deficits, and a desk drawer full of unpaid obligations from the previous legislature’s budget gimmicks. And that doesn’t take into account the needs to replenish things like public pension funds and rainy day funds that were drawn down to help us muddle through.
It’s more of the same at the national level, especially as the prolonged nature of the Iraq conflict makes it harder to hide its financial costs under the rubric of the overall Defense budget. The prospect of tax increases in the near future at all levels of government is higher than it has been for a decade.
Another concern has to be our own expectations. In the mid-1990’s, the national economy grew its payrolls by an astounding average of 320,000 jobs per month, the stock market soared, and twenty-somethings were contemplating early retirement. Will anything short of that now be a disappointment?
Let us hope not. For now, we have steady, if unspectacular, job growth in the national economy, and that’s a lot better than the alternative.
About the Author
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