Economists React to Jobs Data

Sunday, December 04, 2005 | 02:25 PM

The WSJ reports that "hiring recovered in November from a hurricane-induced slowdown in the previous two months, as employers added 215,000 jobs to U.S. nonfarm payrolls, suggested that employers were more willing to take on new workers as the economic effects of a destructive hurricane season faded. Energy prices, which soared as powerful storms roiled oil and natural-gas production, have declined recently, and headaches caused by disruptions to transportation have eased. The unemployment rate held at 5%.

What's ahead for the jobs market? Economists weigh in:

* * *

Katrina came. Katrina went. Except in parts of the Gulf Coast, it is time to move on and that is what is happening in the economy. Job gains rebounded to what I consider to be normal levels in November. And, despite the massive losses in the Gulf, the revised data indicate we never did see payrolls decline. The September drop is now a small gain. But what is impressive is the broad based nature of the increases. Over 62% of the industries reported payroll gains, the highest since hiring
began to rebound sharply in spring of 2004.

-- Joel L. Naroff, Naroff Economic Advisors

* * * * *

The one indicator that may prove most troubling to some bond market participants will be average hourly earnings. We are long-time skeptics of this series, but it still garners the most attention of the various wage measures. Hourly pay rose 0.2% in November, and both September and October's advances were bumped up upon revision. As a result, the year-over-year increase accelerated to 3.2%, highest since March 2003. … That makes me more inclined to believe that something real is happening on the wage front, which confirms our suspicion that the economy is operating fairly close to full employment.

-- Stephen Stanley, RBS Greenwich Capital

* * * * *

Today's data suggest labor market recovery remains on track following the hurricane hits in September/October.  Still, increases in labor input are mild given current growth rates. Mildly diminishing labor market slack isn't too threatening if these trends persist.

-- Steven Wieting, Citigroup

* * * * *

This report is about as close to consensus expectations as an employment report can be. The report shows solid employment growth and hints that tightness in the labor market may be pushing wage increases higher. If this latter trend continues, it will be of concern to policymakers at the Fed.

-- John Ryding,Conrad DeQuadros, Elena Volovelsky, of Bear Stearns

* * * * *

The most interesting feature of this month's report is the information from some special questions in the household survey on persons displaced by Hurricane Katrina. There are nearly 900,000 persons 16 and over evacuated for Katrina, split evenly between those now in the same residence as in August and those in a different residence than in August. The employment-to-population ratios are 46.1 and 41.6 percent for the two groups, respectively, compared to a national figure (not seasonally adjusted) of 62.9 percent. If the national figure is a reasonable proxy for what the Gulf Coast might be experiencing absent the hurricanes, that suggest continued unused labor capacity of about 30 percent among those people evacuated.

-- Andrew Samwick, Dartmouth College

* * * * *

Job growth was well distributed in November, suggesting that much of the earlier weakness was temporary in nature and most likely due to the disruptive influence of the hurricanes and the temporary spike in oil and gasoline prices. There is nothing in this report that changes our basic view of Fed policy (25-basis-point tightening moves at the next four meetings) nor of underlying economic activity.

-- Joshua Shapiro, Maria Fiorini Ramirez Inc.


* * * * *

While the gain is encouraging, there is still a matter of lost jobs in September and October that have not been recovered. Without a hurricane, we would have expected job growth to average about 200,000 per month over the past three months (or 600,000 jobs total), but instead, Non-farm payrolls increased by only 92,000 jobs on average over the past three months. The recovery process may be stretched out over a long time period.

-- Stephen Gallagher, SG Cowen

* * * * *

The slow tightening in the labor market is gradually boosting hourly earnings but the absence of any bargaining power is keeping that gain relatively modest, especially after adjusting for inflation. The flat workweek indicates that businesses remain very cautious. As interest rates rise and it becomes more difficult to extract home equity to sustain consumer spending, gains in hourly earnings will become increasingly important.

-- Steven Wood, Insight Economics

* * * * *

Nominal wages have grown at a 3.5 percent annual rate over the last quarter. This is up from just a 2.5 percent annual rate in the first half of the year. This suggests that workers are taking advantage of a tighter labor market to secure wage gains. Wages had lost considerable purchasing power over the last year and a half due to higher energy prices, but with gas prices plunging in the last month, and wage growth accelerating, workers may finally be poised to get a share of the gains from the recovery.

-- Dean Baker, Center for Economic and Policy Research

* * * * *

The BLS has not offered any estimates of the ex-storms number, presumably because the flow of people making unemployment claims as a result of the storms -- which can be measured -- is being offset as people who had been laid off return to work or find new jobs, which cannot be captured by the survey.

-- Ian Shepherdson, High Frequency Economics

* * * * *

There was evidence of some recovery of jobs that had been lost due to the hurricanes but the pace of rehiring appears to have been slower than we had assumed. For example, the leisure & hospitality category (which includes restaurants, hotels, etc) showed average monthly job gains of 30,000 during the first eight months of the year, followed by hurricane-related declines totaling 82,000 during September and October. In November, this sector showed a rise of 29,000. So, we are back to trend but there still appears to be be about 140,000 lost jobs in the leisure and hospitality industry that should be recovered at some point in the months ahead.

-- David Greenlaw and Ted Wieseman, Morgan Stanley

* * * * *

Normally, a figure greater than 200,000 is considered very good but coming after two months of tepid jobs growth, thanks to hurricanes Katrina and Rita, the November gain should be viewed as adequate. Over the last three months, jobs growth has averaged 92,000. Economic growth appears to be moderating from the red hot numbers posted in the third quarter, and it the Fed does not push interest rates too much higher, the economy will grow at a 3.5% pace the first half of 2006.

-- Peter Morici, Robert H.Smith School of Business, University of Maryland

* * * * *

As an indication of things to come, the construction industry added 37,000 worker in November and 35,000 in October. This above trend strength is likely to continue as workers normally laid off in the winter find plenty of jobs in the South where  reconstruction from the storms will intensify in the months ahead.  We also expect overall job growth to continue running above trend  until all the workers displaced by the hurricanes have returned to work.

-- David H. Resler and Gerald Zukowski, Nomura Securities International

* * * * *


Source:
Economists React
December 2, 2005 11:09 a.m.
http://online.wsj.com/article/SB113353387965812453.html


Sunday, December 04, 2005 | 02:25 PM | Permalink | Comments (5) | TrackBack (0)
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Comments

Ok "nominal" wage rates are rising, but even 3.2% seems at roughly state inflation and possibly a fair bit off the actual thing.

Could it be that many employers are decent enough or heavily pressured enough by valued workers to raise wages in response to this?

Posted by: donna | Dec 4, 2005 2:47:14 PM

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