U.S. jobless rate dips to 9/11 levels
http://www.contracostatimes.com/mld/cct ... 093648.htm
Posted on Sat, Jul. 09, 2005
U.S. jobless rate dips to 9/11 levels
By George Avalos
CONTRA COSTA TIMES
The nation's jobless rate in June improved to its best levels since the Sept. 11, 2001, terrorist attacks in a government report that depicts a solid employment market, although one not completely free of soft spots.
The combination of steady job gains and a consistent improvement in the unemployment rate helped propel Wall Street on Friday. The Dow Jones industrial average soared by 147 points, or 1.4 percent. The broad-based S&P 500 index jumped 1.2 percent and the tech-focused Nasdaq Composite rocketed 1.8 percent higher.
High energy costs are the biggest threat to the jobs rebound. Economists warn that rising crude oil prices might blunt the job market as employers hold off on hiring.
Still, the nation's jobless rate fell to 5 percent, the lowest since September 2001. Job gains culled from a survey of employers totaled 146,000 in June, although that number fell somewhat below what analysts had predicted.
That monthly update on jobs in the United States prodded some economists to argue that the government now consistently fails to account for all of the country's employment creation. The government's closely scrutinized payroll survey in June showed far less job growth than the less-watched household survey -- a trend that's been under way for about two years.
The two surveys spring from different samples, which is why their results can vary. Employer payroll reports are the primary source for the payroll survey, which is favored by many economists because the sample is quite large. The household report is based on a poll of people at their homes that primarily asks whether they are employed or unemployed. Some economists believe the household survey can pick up employment trends more quickly. The differences enable some economists to argue that the job market is considerably stronger than the payroll survey indicates.
"There is certainly an undercount of the number of jobs being created as measured by the payroll survey," said Mark Vitner, senior economist with Wachovia Securities. "The unemployment rate has come down steadily, the number of people unemployed for long term periods of time has come down, the number of discouraged workers has come down."
The household survey has shown a gain of 2.5 million jobs in the United States over the last 12 months. The payroll survey also has shown a healthy rise -- but only 2.1 million new jobs. The household survey is also showing a faster rate of growth, rising 1.8 percent in a year compared with 1.6 percent more jobs measured through the payroll survey.
Why does this job chasm persist? The U.S. Bureau of Labor Statistics is failing to properly gauge jobs being obtained by illegal immigrants and self-employed individuals, or being created through small companies and startups.
"We are not counting jobs held by undocumented workers nearly as well as we did in the 1990s," Vitner said. "In the wake of the 9/11 attacks, many immigrants went underground following roundups of illegal immigrants at airports and other sensitive places. A lot of work has gone underground. In a lot of cases, these immigrants have formed their own companies."
Immigrant entrepreneurs are far from alone: Small businesses account for about 75 percent of new-job creation, according to the Census Bureau, and they account for about 50 percent of the nation's total economic output.
"We live in the most entrepreneurial economy in 100 years," said Brian Wesbury, an economist with Claymore Securities. "Technology is the real factor behind all this. All of the new software and computers makes it less expensive to run a company. Now technology lets any of us start a company."
As people start new companies, they do not always appear right away in the federal database of employer payrolls, but they can show up on the government's monthly update on employed and unemployed Americans. This lag has created a divergence in job growth as measured by the two surveys that has persisted in 2005.
The June labor report showed an increase of 146,000 jobs through the payroll survey and a jump of 163,000 jobs through the household survey. And for the first six months of 2005, the average monthly job gain in the payroll survey is 181,000, but the average monthly gain in the household survey is 247,000.
"The labor market is a lot stronger than what people might imagine," Wesbury said.
What's more, even the battered factory sector may be starting to turn around, said Anthony Chan, economist and managing director with J.P. Morgan Asset Management.
"Most of the recent surveys suggest that manufacturing employment is turning the corner," Chan said. "We believe manufacturing is going to start to report more jobs and reverse course on its decline." Since manufacturing employment peaked in early 1998, that job sector has shed 3.4 million jobs.
The solid employment picture is extending to the East Bay, according to Lauren Vergara, manager of the Walnut Creek office of Robert Half International.
"It's really amazing how much the market has turned around," Vergara said. "We are getting plenty of business in the East Bay. A lot of clients are calling in with multiple job orders. It has become a marketplace that is starting to favor the job candidate more than the employer."
George Avalos covers the economy, financial markets, and banks. Reach him at 925-977-8477 or gavalos@cctimes.com.
