News Column

Job Gains Clouded by Low Pay

June 10, 2013

Hugh R. Morley

A gain of 175,000 jobs in May in the U.S. drew modest plaudits from economists Friday, even as the relatively high number of temporary jobs and positions in low-paying sectors raised questions about the strength of the economy.

The U.S. added 178,000 private-sector jobs and shed 3,000 government positions, as the jobless rate ticked up to 7.6 percent from 7.5 percent, according to the monthly jobs report released by the U.S. Department of Labor.

Economists shrugged off the jobless rate increase, saying it was mainly fueled by growth in the labor force as formerly discouraged workers gained hope and started to look for work again, rather than a significant boost in the number of unemployed people.

"It wasn't anything special," economist Joel Naroff of Naroff Economic Advisors in Holland, Pa., said of the report. "It's an indication that the economy is improving, but it's not improving at a very decent pace."

Employment rose in line with the average monthly hike of 176,000 jobs added over the last year. That's not too far below the 200,000 jobs a month some economists say the economy needs to add to the jobless rate.

Yet there were also signs the May job creation may not help the economy as much as might be expected. Two of the biggest gains came in the leisure and hospitality sector, which added 43,000 jobs, and in retail, which gained 27,700. Both areas contain a high proportion of lower-paying positions that often don't provide benefits.

Temporary jobs

Of the 57,000 jobs added in the professional and business services sector, which saw the biggest hike, 25,600 were in temporary-help services, which many workers consider a less desirable option compared with full-time employment. The temporary sector has grown by 7.5 percent in the last 12 months, nearly five times as fast as the overall job market.

Economists say companies often take on temporary or part-time workers after a recession because they lack the confidence in the economy to hire full-time permanent workers. Then, once the economy picks up, employers convert temporary or part-time positions to full- time permanent jobs, economists say.

Yet it's unclear whether that conversion process is under way. The nation added temporary positions in recent months at a far quicker pace than six months ago.

Local employment agencies such as Robert Half International in Paramus and Adecco in Wayne say they are seeing employers fill both temporary and permanent positions, and take that as a sign that the economy is strengthening.

"Businesses are gaining a little more confidence, but the caution is still there," said Robin Amster, senior branch manager at the Wayne branch of Adecco. "So the temporary approach is safe for them."

She said she has seen an uptick in both temporary and "direct" hiring to permanent posts. That is an improvement from this time last year, when the agency saw strong temporary hiring, but permanent hiring was flat.

Joe Marley, branch manager at Manpower in Hackensack, said employers working with the agency had converted three temporary positions to full time in the last week -- two office jobs and one in manufacturing. "That's pretty positive," he said.

Amster said one thing that may be preventing employers from hiring is uncertainty over how the Affordable Healthcare Act affects their business.

Before the report was released Friday morning, some analysts speculated that strong job growth could prompt the Federal Reserve Bank to pare the $85 billion in monthly bond purchases that have kept borrowing costs low and fueled a stock-market rally.

Anika Khan, senior economist for Wells Fargo Securities, echoed the view of other economists that the May job creation was not enough to prompt such a move. She suggested it would require a monthly employment hike of 200,000 for several months to push the Fed into changing its tack.



The labor market story

The Labor Department reported Friday that payrolls rose by 175,000 in May. The jobless rate increased to 7.6 percent from 7.5 percent. Here are some other details from the report:

Retail: Added 27,000 jobs.

Manufacturing: Lost 8,000 jobs, the third straight monthly decline.

Health care: Increased by 10,700 jobs.

Construction: Gained 7,000 jobs.

Participation rate: Rose to 63.4 percent from a 34-year low of 63.3 percent.

Revisions: 12,000 jobs subtracted from the counts in April and March.

Average hourly earnings: Rose to $23.89 from $23.88.

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Source: Copyright Record, The; Bergen County, N.J. 2013

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