South-Western College Publishing - Economics  
Employment Exceeds Expectations
Subject Employment Growth
Topic Employment, Unemployment, and Inflation
Key Words Employment, Unemployment, Inflation
News Story

The U.S. economy created more jumps than expected in January, holding the nation's unemployment rate at 4.3 percent -- a 28-year low. January job gains were 245,000 nearly 100,000 above economists' expectations. The question now is whether the Federal Reserve will raise interest rates out of concern that the expanding economy is creating labor shortages that will increase wages and spur inflation.

Employment growth was strongest in the service sector, with engineering, management, and computer service sectors registering strong gains. Retailers, financial and real estate firms, and construction companies also reported job gains. The manufacturing sector lost 13,000 jobs in January, considerably fewer than some analysts had predicted. The predictions of greater job loss in manufacturing were based upon the economic turmoil in Asia, Russia and, now, Latin America.

Job market growth also meant larger pay raises for U.S. workers. Average hourly wages of non-supervisory workers rose 6 cents in January, the largest monthly increase since August. Over the past year, hourly wages are up by 4 percent.

The unemployment rates for black and Hispanic workers fell in January to their lowest levels since the early 1970s. The unemployment rate for black workers was 7.8 percent and 6.6 percent for Hispanic workers, compared with a 3.8 percent rate for white workers.

(Updated March 1, 1999)

1. Why did analysts expect a much greater decline in manufacturing than actually materialized?
2. The Federal Reserve may consider raising interest rates in order to prevent inflation. How might an expansion in the labor market lead to inflation?
3. What are some explanations for the differences in unemployment rates among whites, blacks and Hispanics workers?
Source Associated Press, "Jobless rate holds steady at 4.3%", USA Today, February 5, 1999.

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