Jobs pinch helps wages

Some companies may be having trouble finding workers

What will the Fed think?

Average worker pay up 0.5% in September to $13.37 an hour

The economy

October 09, 1999|By BLOOMBERG NEWS

WASHINGTON -- U.S. job growth stalled in September and wages showed the largest gain in 16 years, the government said yesterday in a report that suggested that companies may be struggling to find workers.

Unemployment held steady at a 29-year low of 4.2 percent last month as companies shed 8,000 jobs, the Labor Department said. Without the effects of Hurricane Floyd, the economy would have added about 50,000 jobs, the government estimated. Still, that would have been less than one-fourth of the 220,000 gain that analysts had expected.

Service companies reported job declines for the first time in six years. "The difficulty of finding workers is clearly the main issue we're dealing with," said Carl Camden, executive vice president of Kelly Services Inc., a temporary help agency. "We see no signs of a slowdown in the job market."

Workers' average hourly earnings rose 7 cents, or 0.5 percent, to $13.37 last month after a 0.2 percent increase in August. Last month's increase was the largest since an 8-cent jump in September 1983, a Labor Department spokeswoman said.

That could be a concern to Federal Reserve officials, who warned Tuesday that they might raise interest rates again if companies cannot fill jobs and end up boosting wages and eventually prices.

Over the past 12 months, hourly earnings rose 3.8 percent, up from a 3.5 percent year-over-year gain in August. Wage increases "could keep alive the notion the Fed could still tighten in mid-November" to slow the economy as a way of keep inflation from accelerating, said Kevin Flanagan, an economist at Morgan Stanley Dean Witter in New York. Even so, U.S. prices are not rising much, except for gasoline and other petroleum products. November crude oil futures rose as much as 82 percent this year and, even after a big decline this week, are still 55 percent higher than they were Jan. 1. Excluding the cost of oil and food, core consumer prices were just 1.9 percent higher in August than a year ago -- the smallest year-over-year increase in 33 years.

The labor force is growing at about the same pace as in the past two years, aided in part by a flow of new immigrants.

In September, the percentage of the U.S. population holding jobs was unchanged at 64.1 percent and just down from a high of 64.5 in January.

The drop in jobs was the first since a loss of 7,000 in January 1996, a Labor Department spokeswoman said. Several job losses have been reported since then, but they have all been revised to gains in later months.

In August, companies added 103,000 jobs, a lower estimate than the 124,000 first reported.

Service-producing employment fell 9,000 in September, the first drop since March 1993, reflecting losses in retail and government jobs. That is a contrast from the average gain in service jobs of 207,000 in the past six months.

The loss of 49,000 jobs among retailers was the second monthly drop in a row for that group and the biggest since April 1991 at the end of the last recession.

Manufacturing employment decreased by 21,000 after falling 77,000 in August. Government jobs fell 23,000, and construction employment rose by 21,000.

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