South-Western College Publishing - Economics  
Good News for Labor
Topic Employment, Unemployment, and Inflation
Key Words Jobs, Wages, and Economic Growth
Full Article

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Reference ID: A161687285

News Story While some signs of economic activity appear to be weak, the news is good for the labor market. Job growth showed little sign of slowing and the wage rate continues to increase. The labor numbers are consistent with an economy that is being supported by strong spending from the consumer sector which translates into considerable hiring by businesses like restaurants, bars, department stores and educational services.

The Labor Department reported that overall employment outside the farming sector grew by 180,000 in March. Employment growth in January and February was stronger than originally reported according to revised numbers released in March. These revised numbers indicate an additional resilience in the labor market.

This good news comes as the economy shows signs of imbalance in other areas. Housing continues to show weakness and worker productivity is falling some. Still the job market continues to show momentum.

"Sometimes the pieces of the puzzle don't fit together the way you'd expect them to," said Jared Bernstein, an economist with the Economic Policy Institute. "And it's the tireless American consumer who's keeping the job market moving forward."

The Labor Department's employment report offers evidence that consumers may continue their free spending supporting even more jobs in the future. The average hourly earnings for workers grew by 4 percent in March reaching an average of $17.22 per hour.

One issue that could turn consumer spending in the opposite direction in the future is the fact that much of the money being spent by consumers is borrowed. The Federal Reserve reported that consumer debt rose in February by $2.97 billion to a record of $2.4 trillion. American consumers are putting much of the new debt on revolving credit which includes credit cards. The Fed's measure of revolving credit rose $2.494 billion after rising by only $1.229 billion in January.

Still, most economists see the current job market as strong with a likelihood that it will continue. "The fact of the matter is the job market is very, very healthy," said Joshua Shapiro, chief economist of MFR, "And it's not like this is a fluky one-off thing. There's a whole host of evidence about the labor market that points to strength."

Discussion Questions:
1. Discuss the process of how more consumer spending results in more jobs.
2. Draw an aggregate supply-aggregate demand diagram and show what you would expect to happen as consumer spending increases. Label your beginning and ending positions carefully and explain the result.
Multiple Choice/True False Questions:
1. When consumer spending is strong it translates into more jobs in the economy.
  1. True
  2. False
2. Much of the increased consumer spending has been put on credit cards.
  1. True
  2. False
Source Jeremy W. Peters, "Job Growth Surged and Wages Rose in March Data", The New York Times Online, April 7, 2007.
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