By PATRICIA COHEN. NOVEMBER 7, 2014 Only days after many voters complained of worsening economic prospects, the new employment report from the government on Friday provided fresh evidence that the economy was actually getting better, with a sizable jump in the number of people saying they found a job last month. The Labor Department estimated that employers added 214,000 jobs in October, and the official unemployment rate dropped to 5.8 percent, down sharply from 7.2 percent a year ago. The increase in payrolls — combined with a revision that added 31,000 jobs to previous reports from August and September — put the average monthly job gain for the last six months at about 235,000. That pace, several analysts said, indicated that the economy was gathering momentum. But the report also found that wages were rising only slightly faster than the rate of inflation, fueling the debate over just how strong the labor market really is. Over the last 12 months, wages are up just 2 percent, which helps explain much of the disconnect between increasingly cheery assessments from many economists and the public’s continuing discontent. President Obama said that the economy had experienced the strongest job growth since the 1990s, and that the unemployment rate was at a six-year low. “We are adding jobs, but it is still a wageless recovery,” Elise Gould, an economist with the left-leaning Economic Policy Institute, said, adding that average hourly earnings rose only 0.1 percent in October after no gain in September. “The economy may be growing, but not enough for workers to feel the effects in their paychecks.” Many economists nonetheless found plenty of reasons to be optimistic about the future. The number of people walking away from the labor market has halted, while the average number of hours worked ticked up. And a survey of households, though generally considered less reliable than figures gathered from employers, found that more than 683,000 people had been hired into a new job last month. “Labor force participation actually rose” to 62.8 percent, said Carl Tannenbaum, chief economist at the Northern Trust Company, who noted that the drop in unemployment was not simply a result of people dropping out of the work force. A broader measure of unemployment that includes discouraged job seekers or those stuck with only part-time work dropped to 11.5 percent, down more than 2 percentage points from the seasonally adjusted figure from a year ago. The headway on jobs can be seen as validation of the Federal Reserve’s decision to end its bond-buying campaign last month, while the lack of wage growth is likely to add caution to the Fed’s considerations over when to raise interest rates next year. “I’m not thinking we’re behind the curve,” Loretta J. Mester, the president of the Federal Reserve Bank of Cleveland, told CNBC on Friday, meaning that the latest jobs numbers had not convinced her that the Fed should move more quickly. Some analysts counseled patience on the wage front, predicting that the strengthening job market would soon translate into tangible increases. “We think this is a very strong report,” said Michael Gapen, an economist at Barclays. “We will see wage gains going forward. They just didn’t show up in this report.” Paul Ashworth, an economist at Capital Economics, said the Labor Department’s figures might not reveal all the progress that has been made. “The employment cost index is a much more comprehensive measure of wage growth, on which the Fed has traditionally put more weight,” he noted, concluding that “it shows a very clear acceleration in wage growth” over the last six months. Perhaps, but as Labor Secretary Thomas E. Perez pointed out, what people care about is their weekly paycheck. “Wages are what matter to living standards,” he said. Mr. Perez noted that workers had benefited from few of the gains in productivity in recent decades. “Sweat equity isn’t translating into financial equity, even while the C.E.O.s of those companies are reaping dramatic rewards,” he said. “That’s the angst and frustration that I see across this country.” While the recovery from the recession is in its sixth year, stagnant wages and the wide gap between the rewards for those at the top of the income ladder and for ordinary workers have left many people disenchanted with their economic prospects. Election Day exit polls found that 78 percent of those surveyed were very or somewhat worried about the future of the economy, while two-thirds said they believed the economy was getting worse. The lack of wage growth, particularly at the bottom, helps explain why ballot measures aimed at increasing the minimum wage in Alaska, Arkansas, Nebraska, Illinois and South Dakota all passed despite widespread losses in those states among Democrats who supported such measures. “It may seem counterintuitive that wages and salaries are growing the slowest in industries where jobs are growing the fastest,” LaVaughn M. Henry noted in an analysis from the Federal Reserve Bank of Cleveland’s Cincinnati Branch, “but it actually is not.” Because many of the new jobs in the leisure, hospitality and retail industries require little training or credentials, he explained, there is little pressure to raise wages. Low-paying leisure and hospitality jobs accounted for nearly one in eight new jobs created in the past year, economists at IHS Global Insight noted, while many of the newly reported hires were teenagers. There were also racial disparities in the job gains, with whites experiencing an unemployment rate of 4.8 percent compared with 10.9 percent for blacks and 6.8 percent for Hispanics. The persistent problem of long-term unemployment showed no signs of improvement this month, with 2.9 million people out of work for 27 weeks or more. This group accounts for about a third of those without jobs. Even the gloomiest assessments, however, acknowledged that no matter how tepid one might think the recovery is, the United States is still far outpacing Europe. Six years after a debt crisis hit the continent, unemployment in the European Union has edged down only slightly to 11.5 percent from a peak of 12 percent last year. It is nowhere near returning to precrisis levels of around 7 percent. There are other signs of the American economy’s strength. Over the last 12 months, according to a report released on Wednesday, the number of bankruptcy cases filed in federal courts dropped 13 percent to 963,739, the lowest since the 2007 fiscal year. And consumers, encouraged by falling gasoline prices, are more upbeat about job prospects than at any time in the last six years. Many of the strongest jobs gains were in service industries, created by small-business employers like Matthew Saravay, who runs Wizard Studios, a special-event production company in Brooklyn. “We’ve never been busier,” Mr. Saravay said. “I have interviews lined up, trying to keep up with the clamor of opportunity. We’re seeing holiday parties return in a way I haven’t seen in seven or eight years.” Steve Roesner, president and chief operating officer of Quatro Composites in Iowa, which produces structures for manufacturers in the aerospace industry, said he hired 100 new workers this year, bringing the company’s total staff to 220. He expects to further increase his work force by 20 percent next year. “In our industry, there’s a lot of optimism,” Mr. Roesner said. Looking ahead, Tara M. Sinclair, an economist at Indeed, one of the nation’s largest sites for job postings, said she had noticed particularly strong growth in the retail and transportation sectors. “It definitely looks like things are slowly moving in the right direction,” she said.
Posted on: Sat, 08 Nov 2014 17:12:05 +0000
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