South-Western College Publishing - Economics  
The Joint's Still Jumping
Subject Measuring Economic Aggregates
Topic Employment, Unemployment, and Inflation
Key Words Employment, Unemployment, Downsizing, Economic Growth
News Story

The U.S. economy continues to pump out jobs. The Labor Department reported that the nation's unemployment rate fell from October's rate of 4.6 percent to 4.4 percent in November -- coming very close to a 30 year low. More Americans are working than ever, with job gains in November the largest in three months. About 64.1 percent of Americans of working age are employed -- the highest percentage on record. More good news for American workers is that earnings are 3.7 percent higher than a year ago. Given the low inflation rate, this amounts to a strong increase in real earnings.

In spite of the economic turmoil in some parts of the world, the U.S. economy continues to expand. The economy has been growing at a 3.7 percent annual rate and adding about 226,000 jobs a month. Prime-age workers -- those between the ages of 35 and 54, and typically the principal wage earners in the family -- are experiencing the lowest unemployment rate, 3 percent, in over 30 years. The aggregate unemployment rate has been below 5 percent for almost 18 months. In spite of the tightest labor market in decades, there is no sign that this has put pressure on prices to increase.

Everything is not rosy, however. There are continued reports of downsizing, especially by corporate giants. Factory worker jobs are declining. Last month, manufacturing employment decreased by 47,000 following an October decline of 61,000.

The large job gains in sectors such as the service industry and construction, occur at the same time as manufacturing is losing jobs. Workers displaced from manufacturing are filling many of the jobs being created in the growing service and construction sectors. This process of job destruction and creation illustrates the dynamic nature of a capitalist economy.

(Updated January 1, 1999)


1. The article describes labor markets in the U.S. as being "tight". What is a tight labor market?
2. What would we expect to happen to wages when labor markets are tight?
3. Labor mobility, that is, the ability of a worker to change jobs, is important to economic growth. What policies can government adopt to encourage labor mobility?

Source Sylvia Nassar, "Jump in November Sent Work Force to a Record High", The New York Times, December 5, 1998

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