US joblessness ebbs to rare historical low
It hasn't been so low since the dotcom heyday. But it may also portend an interest-rate hike.
NEW YORK AND BOSTON — It is not often that the nation's unemployment rate sinks to 4.4 percent.
It did in 2001, when dotcom entrepreneurs were still writing checks that didn't bounce. Jobs were also plentiful in the early 1970s, when the nation was at war in Vietnam. Ditto for 1957, when the economy had fewer women, teenagers, and minorities in the workplace.
Now, add October 2006 to the list.
In the last major economic report before Tuesday's showdown at the ballot box, the Labor Department says the unemployment rate is now at that level, down from 4.6 percent in September. It is a piece of good news for an embattled president and suggests the economy is stronger than many recent estimates. The downside is that the Federal Reserve, which has not raised interest rates in its past three meetings, may have to think about a rate increase early next year – which would keep inflation in check but could cause unemployment to rise.
"By its first meeting in 2007, the Fed will have to give active consideration to raising interest rates," says Lyle Gramley, a former Fed governor who is now a consulting economist at Schwab Washington Research Group. "The odds are that rates are going up, not down."
In the past, the Federal Reserve has stomped on the monetary brakes – pushing the economy into a recession – when the unemployment rate has dropped this low. But this time, Mr. Gramley says, the financial backdrop is different: Long-term interest rates are at the same level as June 2004, the stock market is up 15 percent, and the dollar is down 5 percent.
"Normally, when the Fed is raising short-term rates, you expect the stock market to weaken and the dollar to rise. [But current] financial conditions are still quite accommodative, and as a result [raising interest rates] is not likely to drive the economy into a recession."
The latest economic numbers, while positive for workers, may indicate a shift is taking place in the economy, says Gregory Miller, chief economist at SunTrust Banks in Atlanta. "More people are working, but we produced less. This suggests productivity is no longer a dominant force," he says. "Strong productivity is good for sustainability."
The buoyant job market is not a surprise to employment specialists. At Spherion, a staffing company based in Fort Lauderdale, Fla., demand remains strong in accounting, information technology, the legal field, sales, and marketing. "One of the exceptions is interest-sensitive areas like mortgage banking," says Brendan Courtney, senior vice president.
Layoffs normally increase at this time of year, says John Challenger of the Chicago outplacement firm Challenger, Gray & Christmas. But layoffs last month were down 15 percent compared with a year ago and 30 percent lower than September's rate. "It indicates the labor market is strong now."
One reason the unemployment rate has fallen so low is an increase in the number of self-employed people, according to Mr. Challenger. "The economy has really changed. People want to work for themselves."
One such person is Moira Madell of Madell Consulting in Chicago. Ms. Madell, who worked for a benefits consulting firm for nine years, used to consider her human-relations consulting job temporary. But now, she says, it allows her the flexibility to raise a family. "It's very satisfying, a nice fit for me."
Many low-skilled workers are finding many job openings, but very few that pay well or offer decent benefits, says Barney Oursler, co-director of the Mon Valley Unemployed Committee in Homestead, Pa.
While the boom in the healthcare industry has given new hope to some low-skilled workers, Mr. Oursler warns them that without training they'll wind up changing bedpans for about the same pay as working at the local Target. Two years of training are typically needed for higher-paid healthcare work.
In fact, when Betty Mesler of Fairchance, Pa., was laid off last year from a nearby Sony television factory, she knew right away that she needed to retrain. Retail jobs wouldn't pay enough, and as for factory work, it wasn't realistic.
"I knew that, especially in our area that's so depressed, factory work was just not ever going to be an option, and I knew that the healthcare field is a lot more stable," she says.
She enrolled in a 14-month course to train as a surgical technician. She expects starting pay to be $11 to $14 an hour – not as much as Sony paid, but over time, a decent wage. "Working in a factory was fine, but you don't really have a skill," says Ms. Mesler.
Even in hotter economic regions like the South, there's still a scrum for jobs. When Toyota announced it would hire 300 new assembly-line jobs at its Huntsville, Ala., plant in 2002, the company received 30,000 requests for applications. Some 15,000 people ended up applying. In the past 12 months, the company has hired an additional 350 workers from a pool of 10,000 applicants in an area with an unemployment rate of about 3.5 percent.
"We found a lot of people wanting to improve their standard of living, or wanting to find a job that they know is stable and going to be here for the long haul," says Stephanie Deemer, spokeswoman at the Alabama facility.
Some parts of the country are actually experiencing labor shortages. In Fargo, N.D., which has the lowest unemployment rate in the nation at less than 2 percent, some local businesses are having trouble keeping workers on the production floor because they're job-hopping for signing bonuses, says Adrienne Olson at the local Chamber of Commerce.
Among workers with college degrees, the unemployment rate in October is at 1.9 percent. Arizona State University in Tempe has moved away from recruiting fairs in favor of letting employers come on campus at short notice to try to hire from the 51,000-student pool. The boom both in Tempe and statewide has made it one of the best times for graduates in the past 10 years, says Ray Castillo, director of Career Services at ASU.
"It certainly is a much more positive experience than what it might have been a few years in the past," he says. "A lot of it has to do with where we are physically located. We're in a [location] where there is a lot of expanding."