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September 1, 2000

U.S. Aug. Jobless Rate 4.1%; Business Jobs Up 17,000
By Siobhan Hughes, Bloomberg

Shortage of Workers Forces Wages Higher ... Weiss comments

WASHINGTON - The U.S. unemployment rate rose in August as businesses added fewer workers than expected -- in part because of a telecommunications strike -- and the government continued to shed Census workers, a Labor Department report showed today.

The unemployment rate rose to 4.1 percent in August from 4 percent in July, Labor Department figures showed. Businesses added 17,000 jobs and the government lost 122,000 workers -- including those hired for the 2000 Census -- resulting in an overall loss of 105,000 positions. Factory jobs fell 79,000, the largest drop since the General Motors Corp. strike in July 1998. Retail and transportation employment also declined.

While the economy shed jobs overall, excluding the effects of the loss of Census workers and a strike of 87,000 employees at Verizon Communications, total payrolls would have risen 140,000 in August, the Labor Department said. Just excluding the effects of the strike -- which ended a week ago -- private payrolls would have risen 102,000, the Labor Department said.

Workers' average hourly earnings rose 0.3 percent, or 4 cents, in August following a 0.4 percent increase in July. At that rate, businesses should be able to absorb labor costs and hold the line on prices.

The strike also could have contributed to a cooler pace of earnings growth. "Telecommunications workers are on the high end of the pay scale," said Carol Stone, an economist with Nomura Securities International in New York.

Inflation Trigger

Federal Reserve policy-makers keep an eye on the monthly employment numbers to gauge whether demand for workers will trigger an outbreak of inflation. Labor accounts for about two- thirds of the cost of doing business, and higher wages could ultimately be reflected in prices consumers pay for goods and services.

The federal government eliminated 158,000 temporary jobs last month as the Census Bureau completed more work in conducting a U.S. population count. That left 41,000 temporary workers on the payroll as August came to a close.

The pool of available workers -- which combines the number of unemployed job seekers, plus those not looking for work in the last 12 months who said they would take a job -- fell to 10 million in August from 10.1 million in July.

Godfather's Pizza

"Right now I can't hire enough people," said Jerri Stroda, co-owner and manager of two Godfather's Pizza restaurants in Iowa. Her stores are only about 75 percent staffed and over the past year has had to raise starting wages by about 50 cents to $6.50 an hour. "I just have not had people walking through my doors."

The percentage of the U.S. population holding jobs rose to 64.3 percent in August from 64.2 percent in July.

Average weekly hours worked fell to 34.3 in August from 34.4 in July.

Many employers are still eager to hire. Thirty-two percent of U.S. companies planned to boost hiring in the final three months of this year -- the largest fourth-quarter percentage in 25 years, according to Manpower Inc.

More jobs and higher wages are not exactly evidence of lower inflation. Average hourly earnings rose 0.3%, or 4 cents an hour in August. That increase is in spite of the absence of 87,000 striking Verizon employees. Including the wages of these employees (whose strike has already ended) would have boosted wages even more. In addition, the number of employees on company payrolls rose by 140,000 in August, if you exclude striking Verizon employees and temporary census workers.

First-hand accounts from business managers reveal a constant shortage of workers. As the holiday season approaches, the already-drained labor pool will be sucked dry, so look for wages, and inflation, to spike higher.

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