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April 5, 2002

Robust Employment Growth Has Yet to Arrive

It took a lot to bring the U.S. job growth engine to a sputtering halt. Asian currency crises, big fluctuations in energy prices, and even at first a bear stock market did not deter the world's largest economy from creating several hundred thousand new jobs each month. But now that the recession of 2001 has finally snapped a growth streak that was the envy of the developed world, another fact is becoming clear. The job engine isn't going to be re-started overnight, either.

The U.S. Department of Labor reported that the U.S. economy added a paltry 58,000 new jobs in the month of March, following a virtually negligible 2,000 job increase in February. Despite the optimism over some other economic indicators, and the promise of momentum from the economy's s surprising 1.7 percent rate of growth in the final quarter of 2001, it is apparent that businesses nationwide are not yet contemplating the kind of expansions that fatten payrolls.

The fact that job growth is at least moving in the right direction is thanks to hiring in the non-manufacturing sector of the economy. That's because manufacturing is still taking it on the chin. While the 38,000 job decline in factory employment in March is at least less than the 111,000 per month average declines suffered throughout last year, it nonetheless represents the 20th consecutive month that payrolls have failed to increase. That slide cumulates to more than 1.7 million jobs, or a contraction of more than 9 percent.

Of course, the relative decline of manufacturing as an employer is a longer term trend that predates our current economic predicament. We have seen strings of months with weak or negative manufacturing employment growth even in a stronger economic climate. But the severity and the duration of the accelerated job hemorrhaging in production occupations has hit Midwest states like Indiana especially hard.

More heartening is the news from the services-producing side of the economy. One especially hopeful portent of the future is the mild rebound in temporary help services hiring. Once a pillar of strength, the boom in temp services went bust in late 2000, with 20 percent of its jobs slashed through January of this year. But the 69,000 job gain in March represented the second consecutive gain in this sensitive sector of the economy, a hopeful sign of future increases in demand.

The tepid job growth in March was not sufficient to keep the national unemployment rate from rising to 5.7 percent, a 0.2 percentage point gain from February. That rise is probably a sign of labor force growth more than it is a weakening economy.

Across the state of Indiana, however, some area unemployment rates are clear signals of economic distress. In February, the most recent month for which data are available, the unemployment rate in the Gary-Hammond Metropolitan Statistical Area (MSA) was 7.7 percent, reflecting the woes of several bankrupt and teetering steelmakers. Indeed, February was a month that saw only three MSAs in Indiana with jobless rates in excess of 6 percent. The state average was 5.7 percent. All state and regional data are not seasonally adjusted.

The employment report is always significant, since it provides our first comprehensive assessment of the national economy. Unfortunately, with employment growth typically lagging behind in the recovery phase of an economic cycle, its message is likely to be gloomy for at least a few more months.

Link to this commentary: https://commentaries.cberdata.org/428/robust-employment-growth-has-yet-to-arrive

Tags: jobs and employment


About the Author

Michael Hicks cberdirector@bsu.edu

Michael J. Hicks, PhD, is the director of the Center for Business and Economic Research and the George and Frances Ball distinguished professor of economics in the Miller College of Business at Ball State University. Note: The views expressed here are solely those of the author, and do not represent those of funders, associations, any entity of Ball State University, or its governing body.

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