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		Fed, economists see improvement By Robert Gavin, Globe Staff, 1/30/2004 Jobless recovery? Maybe not. The Federal Reserve this week added weight to arguments that the economy is creating more jobs than have been reported in official government estimates. In a statement analysts viewed as preparing the way for interest rate increases later this year, Fed policy makers on Wednesday noted, "Although new hiring remains subdued, other indicators suggest an improvement in the labor market." Many economists say this sentence backs up what they've been saying: Labor Department reports of extremely weak growth in payrolls don't jibe with other data that suggest hiring is rebounding. Mark Zandi, chief economist at Economy.com in West Chester, Pa., estimates the nation has added an average of about 100,000 payroll jobs a month since employment growth resumed last summer -- nearly twice the number reported by the Labor Department during that period. The problem, economists say, is the survey the Labor Department uses to estimate payroll jobs focuses on existing companies, and fails to pick up employment in new firms, which typically spring up in greater numbers in the aftermath of a recession as laid-off workers and others strike out on their own. In a recent analysis, James O'Sullivan, senior economist at UBS in Stamford, Conn., noted that the number of new payroll jobs was underestimated in the early stages of each of the five previous recoveries. In the second half of 1992, for example, the Labor Department initially reported the economy was adding an average of just 48,000 jobs a month. That number was later revised to 130,000 as more data, including tax records, became available to pinpoint new firms -- and jobs. "The Labor Department only surveys the businesses it knows about," Zandi said, "and historically, there's a lot of new firm formation when the economy is coming out of a recession." Economists noted that the payroll survey is improved from a decade ago, so the Labor Department may not be missing payroll growth to the extent it did in the early 1990s. Nonetheless, they said, it's likely the survey is still overlooking job gains. A variety of data back that contention. The Institute for Supply Management's closely watched surveys of manufacturing and service firms have shown that hiring is expanding in both sectors, and even accelerating in manufacturing. The National Federation of Independent Business survey shows that small businesses have added jobs in each of the past two months, and their outlook for continued hiring this year is at its brightest since the late 1990s. Meanwhile, first-time claims for unemployment benefits have been falling steadily in recent months, and dipped again last week to prerecession levels, the Labor Department said yesterday. The level of first-time claims, just over 340,000 a week, is consistent with payroll growth of 100,000 to 150,000 jobs a month, said Nariman Behravesh, the chief economist at Global Insight, the Waltham consulting firm. In addition, the jobless rate has fallen steadily since peaking in June, dipping to 5.7 percent in December from 6.3 percent, said O'Sullivan, the UBS economist. The trend is similar to that seen in the second half of 1992, when the Labor Department underestimated payroll gains by some 500,000 jobs. Still, economists added, even if recent job growth estimates are doubled to about 100,000 a month, the labor market remains weak. The nation needs to create at least a 150,000 jobs a month to make a significant dent in joblessness, according to economists. Sung Won Sohn, chief economist at Wells Fargo Banks in Minneapolis, said that fundamental changes in the economy seem primarily responsible for the recent weak employment reports. Those changes include the shifting of production and workers overseas, and technology-driven productivity gains that allow companies to boost production without increasing employees. "One big reason for the changes is intensified global competition," he said. "You have to raise productivity or you're dead."   Back to Original Article: Mortgage News You Can Use   Continue with: Hire expectations Dollar Firms, Buoyed by Economic Data Part One Dollar Firms, Buoyed by Economic Data Part Two Treasuries Up as Growth Falls Short Treasuries Up as Growth Falls Short part two
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