April 7, 2000
Jobless rate steady, no signs of wage pressure
The unemployment rate for March was unchanged at 4.1%, according to today’s report from the Bureau of Labor Statistics (BLS). Job growth, at 416,000, appeared to be stronger than average, but the increase was mostly the result of two anomalous factors: the hiring of temporary workers for the U.S. Census, and the extra week in this survey period (allowing for more job growth in March and less in April). Subtracting BLS’s estimates of these two effects lowers the growth of payroll employment in March to roughly 224,000, a number more in keeping with recent average monthly growth.
The unemployment rate has now been below 4.5% for the past 17 months, a situation which has helped to generate wage growth among workers who, prior to the tightening of the labor market, experienced stagnant or falling real wages. Of course, these same conditions have led many analysts to worry about the possibility of wage-push inflation, as the low unemployment rate leads workers to push for ever-higher wage increases, which are then passed forward to consumers in the form of higher prices.
If this wage-pressure scenario were occurring, the first sign would be accelerating wage growth. In fact, hourly wages grew 0.4% last month, the same rate as for the prior two months. But over this business cycle-from 1989 through the first quarter of this year-there has been no evidence of accelerating wage growth. The figure above, which plots both the quarterly wage growth for production, non-supervisory workers and the quarterly unemployment rate, illustrates that, while unemployment has continued to edge downward, the trend for wage growth has decelerated. Even with this recent deceleration, wages continue to outpace inflation, but, as the figure shows, there is presently no basis for concern about wage-push inflation, even with unemployment at historic lows.
Economists are mostly unsure why wages have decelerated in the midst of such tight labor markets. One part of the explanation may have to do with the recent decline in manufacturing jobs. Though the losses in this sector have slowed recently-last month factory payrolls contracted by 5,000-over the past two years employment in this sector is down by 524,000.
Construction employment was a source of strong job growth in March, adding 89,000 jobs (though the BLS attributes part of this gain to the extra survey week last month). Service employment continues to show gains as well, with significant increases in business (48,000) and educational services (21,000) last month. Within business services, computer services added 8,000 jobs, while personnel supply services-temporary workers-added 19,000. Over the past year, the temp sector grew by 192,000, compared to 133,000 in computer services. Since computer services are growing from a smaller base, however, its percentage gain is larger-7.8% vs. 5.7%. Nevertheless, the growth in temp work may also be playing a role in lowering wage pressures.
–Jared Bernstein, with research assistance by Abe Cambier
The Economic Policy Institute JOBS PICTURE is published each month upon release of the Bureau of Labor Statistics’ employment report.