South-Western College Publishing - Economics  
Employment High - Jobless Low
Subject Employment and Unemployment
Topic Employment, Unemployment, and Inflation
Key Words Employment, Unemployment, Exports
News Story

The economic slowdown has yet to happen. Despite economic turbulence around the globe, lower corporate profits and the threat of new layoffs, the U.S. economy keeps creating jobs at a record pace. The Labor Department reported that 378,000 new jobs were created during the month of December, the biggest gain in more than a year. About 64.2 percent of the population are now employed -an all-time high. The unemployment rate fell to 4.3 percent, the lowest it has been since April 1970 during the Vietnam War. For the year, unemployment averaged 4.5 percent, the lowest peacetime rate since 1957. This expansion has led to substantial job and pay gains by the most disadvantaged workers. The Labor Department report helped lift the stock market to a new record.

The December report was much better than analysts had been anticipating. Part of the reason for the significant rise in employment was the balmy weather throughout the North and East. The weather postponed seasonal construction layoffs. Another factor in the upswing was the continued high level of spending by consumers and homebuyers.

Employment growth in the service sector was responsible for about 75 percent of the total increase. Hiring by computer service companies increased by more than 13 percent in 1998; due in part to the year 2000 computer problem. Jobs in the retail sector grew by 53,000 in December, while manufacturing jobs continued to decline. Factory employment has fallen by 272,000 jobs since March. The strength of the December report surprised most economists who have been predicting a slowdown in the economy. Since many Asian countries and Russia are in a recession and the economies of many Latin American countries appear to be in a downturn, the decrease in demand for exports would slow the economy. Additionally, analysts had thought consumer spending would moderate.

(Updated February 1, 1999)

Questions
1. The article notes that consumer spending is largely responsible for continued job growth. What percent of Gross Domestic Product (GDP) is due to consumer spending?
2. Declining exports are supposed to slow the economy. What percentage of GDP constitutes exports?
3. Many economists claim that the economy is at full-employment. Why does an expansion to near full-employment produce substantial benefits for disadvantaged workers?
Source Sylvia Nasar, "Hiring Last Month Kept a Brisk Pace", The New York Times, January 9, 1999

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