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4 Either way, it could be an unkind
cut By Henry C K Liu
their hours had been cut back or
because they were unable to find full-time jobs.
Nearly 1.4 million Americans (not
seasonally adjusted) were only marginally attached
to the labor force in August, down by 227,000 from
a year earlier. These individuals wanted and were
available to work and had looked for a job some
time during the prior 12 months. They were not
counted as unemployed because they had
not
searched for work in the four weeks preceding the
survey.
Among the marginally attached,
there were 392,000 discouraged workers in August,
little different from a year earlier. Discouraged
workers are those not currently looking for work
specifically because they believe no jobs are
available for them even if they try. The nearly 1
million remaining persons marginally attached to
the labor force in August had not searched for
work in the four weeks preceding the survey for
reasons such as school attendance and family
responsibilities.
Drop in employment in
August The overall drop in employment in
August was preceded by negligible job growth in
June (+69,000) and July (+68,000), as revised. In
August, employment continued to fall in
manufacturing and construction; local government
education also lost jobs. Job gains continued in
health care and in food services and drinking
places.
Manufacturing employment declined
by 46,000 in August, losing 215,000 jobs over the
past year. In August, declines were widespread
among component industries: for durable goods, job
losses in motor vehicles and parts were 11,000,
machinery 7,000, wood products 7,000, furniture
and related products 4,000, and semiconductors and
electronic components 4,000. For non-durable
goods, manufacturing job loss continued with 4,000
in apparel and 2,000 in textile mills.
Construction employment declined in August by
22,000, with most of the loss occurring among
residential specialty trade contractors. Since its
most recent peak in September 2006, construction
employment has fallen by 96,000. Employment in
local government education fell by 32,000 in
August, as seasonal hiring was less than usual.
Health care employment continued to grow
in August (+35,000); the industry added 396,000
jobs over the year. In August, the good news was
that employment continued to grow in all the
components of health care: ambulatory care
services (+18,000), hospitals (+11,000), and
nursing and residential care (+6,000). The bad
news was that this was the sector with the highest
inflation rates. Employment in social assistance
rose by 14,000 and was 83,000 above its year-ago
level, showing that the economic cancer of income
disparity was growing faster than the economy as a
whole.
Within leisure and hospitality,
food services and drinking places, employment
continued to expand in August (+24,000). The
industry has added 350,000 jobs over the year,
showing that the rich are still enjoying the good
life, albeit employment in the accommodation
industry has trended down over the past three
months due to a drop in business traveling and
middle income family vacationing.
Employment in retail trade was little
changed in August because of back-to-school
shopping. A job gain in building material and
garden supply stores was partially offset by a
decline in general merchandise stores. Wholesale
trade employment changed little in August because
unemployment in these sectors tends to have longer
lag time.
Employment in financial
activities was flat in August, following a large
increase in July. Within the industry, employment
in credit intermediation edged down over the month
and was 19,000 below its most recent peak in
February. The trend is expected to rise sharply in
coming months to reflect turmoil in the credit
market. One company, Countrywide, alone announced
a job-cut program of 12,000 in the next three
months. The mortgage brokerage industry is
expected to lose 100,000 jobs this year. A sharp
shift in employment from deal-making to distress
restructuring is expected.
In professional
and business services, management and technical
consulting services added 7,000 jobs in August,
and temporary help employment continued to trend
down. Temporary help has lost 72,000 jobs thus far
in 2007 as companies downsize by first shedding
temporary workers with no severance cost and
pension liabilities.
Average hourly
earnings of production and non-supervisory workers
on private non-farm payrolls increased by five
cents, or 0.3%, in August to $17.50, seasonally
adjusted. Average weekly earnings grew by 0.3%
over the month to $591.50. The CPI (consumer price
index) in July was 2.4% higher than in July 2006.
August 2007 CPI data are scheduled to be released
on Wednesday at 8.30am Eastern Standard Time, one
day after the scheduled FOMC meeting that decides
on Fed Funds rate targets. The employment
situation for September is scheduled to be
released on Friday, October 5, three weeks before
the scheduled two-day meeting of the FOMC on
October 30-31.
The honest services
issue On Friday, September 7, the
disappointingly bad news on August employment was
released to the public at 8.30am Eastern Standard
Time by the Bureau of Labor Statistics (BLS).
Although the data had been embargoed until
official release time, surely both the Fed and the
Treasury had advanced knowledge of BLS data as
they were collected. It is inexplicable why those
in charge of maintaining the sustainability of a
healthy economy and open and transparent markets
would knowingly pronounce misleading prognosis on
economic trends that they know to be false and
that would be refuted by pending public release of
official data in a matter of days. Do these
officials not realize that by not coming clean
before the sun rises on what they know to be
false, they damage rather than promote market
confidence in their ability to manage the economy?
By any measure, the employment data for
August were discouraging. Yet on Thursday evening,
September 6, some 12 hours before the public
release of the dismal BLS August employment data,
Treasury Secretary Henry Paulson said in an
interview on Nightly Business Report on
Public Broadcasting Service (PBS)that turmoil in
credit markets will only exact a price on the US
economy but would not stall its growth. "There
will be a penalty to our economic growth and I'm
quite comfortable that we're going to continue to
grow, create jobs," said Paulson. "We have a very
strong economy against the backdrop of these
stresses and strains in the capital markets," the
US Treasury chief added confidently.
His
bravado was not echoed by market confidence the
next day. Mortgage defaults continue to soar to
seize up credit markets as lenders grow
increasingly reluctant to lend and investors to
invest in commercial paper amid uncertainty about
the true conditions of portfolios with risky
mortgages that have been packaged into synthetic
tranches of securities, given investment-grade
ratings by rating agencies and sold in credit
markets to unidentified investors around the
world, leaving the market scrambling to determine
which institutions are left holding the unsold
toxic commercial papers.
When asked how
long he thought it would take to sort out the
stress in capital/debt markets and determine how
serious the
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