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Economy Adds 138,000 Jobs in April - Growth Appears Slowing in Second Quarter

Prof. Peter Morici - 5/5/2006

Today, the Labor Department reported the economy added 138,000 payroll jobs in April. The consensus forecast was 205,000. My forecast published by Reuters was 180,000. These disappointing jobs gains indicate that strong first quarter growth is not carrying over into the second quarter. These jobs data indicate the economy is headed for much slower growth than the hot pace set in the first quarter.

Wages were up 0.5 percent but that figure likely will lag inflation when consumer price data are reported on April 17.

Shortages have emerged for workers with key technical skills, even as many ordinary workers cannot find jobs offering good pay and decent benefits. The job market continues to display a disturbing dichotomy—a booming market for the top quartile and a mediocre to lousy market for everyone else. It’s caviar for the best and cake for the rest.

Manufacturing had a surprisingly good month, adding 19 thousand jobs; however, since 2000 this sector has lost more than 3 million jobs. Many more good months will be needed to repair a badly damaged job market for displaced manufacturing workers.

The huge trade deficit plays a key role in all of this. The trade deficit destroys jobs in manufacturing and knowledge-driven service industries that pay above average wages. In turn, import competition and tepid export growth suppresses wages in communities dependent on manufacturing and other more established industries.

Overall, this clamps down on wages for high school graduates with little specialized training even as the economy grows.

High school graduates without significant technical skill and displaced manufacturing workers face a tough job market and a continuing loss of earning power and health benefits.

For these front line workers, jobs with good pay and health benefits are tough to find and will become tougher to find in the months ahead.

Unemployment held steady at 4.7 percent. However, the adult labor force participation rate remains significantly lower than when George Bush took over stewardship of the economy. If adults were participating in the job market at 2000 levels, 2.7 million more people would be looking for work and unemployment would exceed 6 percent.