New job numbers may up interest rate
By Morris Beschloss
Special to The Desert Sun
November 6th, 2004
In the first post-election employment report, an unexpected October surge of 337,000 non-farm payroll jobs set a record for this year. To make the picture even brighter, the Labor Department on Friday reported August and September upward revisions, increasing the three months additional payroll jobs total to over 400,000.
A pre-announcement survey by leading economists had estimated October job creation at between 150,000 and 200,000. The unemployment percentage rose to 5.5 percent from last months 5.4 percent, indicating that job market entrants slightly exceeded available openings.
The hourly wage rate increased an expected 0.3 percent during the month, while weekly hours worked grew to 33.8 from 33.3 the month before.
The bulk of the new jobs created in October came from construction, retail, business services, education and health. The construction sector, buoyed by Florida hurricane repairs, restarting of delayed projects and continued low interest rates, amassed 71,000 new positions. The only downside was manufacturing, which lost 5,000.
This boffo employment report practically guarantees another Federal Reserve Board rate hike on Nov. 10, doubling the 1 percent Fed funds rate that existed in late June. With the Fed funds target at years end originally estimated to top out at 2 percent, further bullish job figures could prompt the Fed to bump up this number at its last meeting of the year on Dec. 14.
Although the ailing manufacturing sector may no longer be the focal point of political fireworks, all indications point to little new hiring in this arena before the end of the year. The close to two million industrial jobs lost since President Bush took office in January 2000 have been a function of major corporate cost-cutting and plant displacement overseas, primarily to China. When additional job requirements surface, these are often filled by overtime and part-time workers.
With U.S. manufacturers unable to pass on costs to the next level in the distribution channel, unprecedented efforts have been made to cut back on indirect labor and administrative jobs, not considered essential to the operational needs of the relevant corporation.
With imports continuing to take an increasingly larger slice of the domestic U.S. markets, hundreds of manufacturers have transferred their basic operations overseas to retain a competitive edge.
Many basic metalworking industries, dependent on steel mills, foundries and machine shops are downsizing, if not totally liquidating their U.S.-based operations. In October, several major U.S. manufacturing corporations announced sizable layoffs.
This subsequent hemorrhaging of industrial jobs is not expected to be reversed in the foreseeable future, as China, India, Mexico, and other emerging industrial economies continue to expand their operational capacity.
Already in motion, however, is a post-industrial technology that is beginning to emerge as a leading factor in the restoration of American manufacturing preeminence. Unlike the "tech bubble" of the late 1990s, this emerging sector is based on innovation in such realistic sectors as nano-technology, biotechnology, telecommunications and aerospace development.
Exports, which are generating record revenues this year due to a weaker dollar, are also boosting certain traditional industrial sectors, such as heavy machinery, construction and farm equipment as well as military and civilian airplanes. Manufactured products comprise two-thirds of the trillion-dollar export sector.
Lost in the focus on corporate job downsizing is the massive swing toward individual entrepreneurships, which have hit an all-time high.
This is reflected in the departments household survey, which shows an additional 367,000 jobs added in October. These include part-time, self-employment, and agricultural workers.
During the four-year period which indicated substantial losses in the payroll survey, an even larger number of new jobs was added in positions classified by the household survey.