|Recently, the United States of America has experienced a 50 hit low resilience of jobless rate / Photo Credit: georgerudy via 123rf|
The US economy just added 136,000 new jobs last month, according to the United States’ Bureau of Labor Statistics (BLS). The country’s unemployment rate also fell to 3.5 percent, which is the lowest rate since December 1969.
The resilience of the US labor market
While the 136,000 nonfarm payrolls are lower than the 147,000 estimates of analysts, it still shows the labor market’s resilience “in the face of weakening economy,” said financial news provider Market Watch. But what does September’s jobless rate mean to the US market? Senior US economist Eric Winograd working for asset management company Alliance Bernstein said via CNBC that it doesn’t change the fundamental economic view, but it shows that the labor market is strong, absorbing new entrants into the workforce and adding more jobs.
Winograd, however, also pointed out that wage growth is still muted. This limits the risk that the labor market tightness may push the country’s inflation rate higher. Labor market tightness is interpreted as the balance between the supply of and demand for labor. The economist went on to say that the question that should be highlighted is how long the US labor market will stay strong, considering that there is continued slowdown in its growth.
As for the officials from the Federal Reserve, they are observing the nonfarm payrolls as clues to determine the economy’s performance. The low jobless rate is only one reflection of a strong economy. Having a slow wage growth also means that the country’s central bank is still at a good distance for achieving its goal of around 2 percent inflation rate.
Nonprofit business membership and research group The Conference Board’s chief economist in North America Gad Levanon also commented that searching for “qualified workers” may become more difficult in the US. Nevertheless, the current report by the US BLS showed that the labor market is healthy.
Having a low unemployment rate means easier job access, less government borrowing, high consumer buying power, and improvement in the efficient use of resources and equipment, which is beneficial not just to firms but also to the overall economy.
The September report of the BLS showed that much job creation (39,000 new jobs) happened in the healthcare industry. On the other hand, retail lost 11,000 jobs. The unemployment rate also dropped to 2.5 percent for Asian Americans and 3.9 percent for Hispanics.
Why the low unemployment rate does not necessarily mean improved earnings
The unemployment rate of the United States may be at its five decade-low but it does not necessarily mean improved earnings, said Ben Wink of Markets Insider. One of the reasons for this is prime-age participation in the labor force. It means that more prime-age people are joining the labor force. As more of them are applying to enter the labor force, firms can also delay the increase of wages because they don’t have to entice the potential employees when it comes to their raises. American retail company Walmart, for instance, is recruiting more teenage employees. It is also advantageous for the company’s part because it costs less, younger people are easier to train and there are no old habits that they have to change. Other companies, like Chipotle, Disney, Starbucks, and McDonald’s, are also applying the same strategy. They offer education benefits apart from the salary that their workers are earning.
Another reason is wage polarization. Economists refer to it as requiring moderate skill levels in the middle-class jobs and greater skill levels for those at the top position. In the US, the labor force is becoming more “saturated” in high- and low-income roles. Automation and globalization have also removed the need for workers in the manufacturing industry, making it more difficult to climb the job ladder.
The security trade-off is also one reason why a lower unemployment rate does not mean wage growth. There is a drop in private-sector union membership and such lack of organization gives companies a leeway to slow hourly wages.
|The unemployment rate of the US does not necessarily mean improved earnings / Photo Credit: Jozef Polc via 123rf|
Employment by major industry sector
BLS Current Employment Statistics survey also published the employment by major industry sector. It compared the number of jobs in the years 2008 and 2018 and then published its employment projection for 2028.
The employment by those industry sectors are detailed as follows.
- Goods-producing, excluding agriculture – 2008: 21,277.9; 2018: 20,661.3; 2028: 20,872.7
- Mining – 2008: 709.9; 2018: 683.3; 2028: 727.9
- Construction – 2008: 7,162.5; 2018: 7,289.3; 2028: 8,096.8
- Manufacturing – 2008: 13,405.5; 2018: 12,688.7; 2028: 12,048
- Utilities – 2008: 558.8; 2018: 554.6; 2028:537.2
- Wholesale trade – 2008: 5,875; 2018: 5,852.5; 2028: 5,754
- Retail trade – 2008: 15,289.1; 2018: 15,833.1; 2028: 15,679.4
The list also includes employment in the transportation and warehousing (2018: 5,419.1), information (2018: 2,828.1), financial activities (2018: 8,568.8), professional and business services (2018: 20,999.5), educational services (2018: 3,727.5), healthcare and social assistance (2018: 19,939.3), leisure and hospitality (2018: 16,348.5), other services (2018: 6,622.4), federal government (2018: 2,796), and state and local government (2018: 19,653).