BLS DAILY REPORT, WEDNESDAY, JUNE 28, 2000
RELEASED TODAY: In May, 222 metropolitan areas reported unemployment rates
below the U.S. average (3.9 percent, not seasonally adjusted), while 102
areas registered higher rates. Twenty-nine metropolitan areas had rates
below 2.0 percent, with 12 of these located in the Midwest, 9 in the South,
and 5 in New England. Of the eight areas with jobless rates over 10.0
percent, six were in California, and two were along the Mexican border in
other states. ...
A new study by three respected economists is fueling debate inside the
Federal Reserve while bringing to a head an academic argument that has been
brewing for 5 years. The subject: How low can unemployment go without
triggering inflation? ... In a soon-to-be-released paper, three scholars
conclude that the jobless rate could long remain as low as 4.5 percent
without a surge in prices. That is higher than the current rate of 4.1
percent, but well below the consensus of mainstream analysts, most of whom
believe that unemployment can't stay below about 5 percent for long without
igniting inflation. The paper was written by George Akerlof, economist at
the University of California-Berkeley; George Perry, senior economist at the
Council of Economic Advisors during the Kennedy administration who is now at
the Bookings Institution; and William Dickens, former member of the Council
of Economic Advisors under President Clinton, now also at Brookings. The
economists believe a long-term jobless rate of 4.5 percent would push
inflation somewhat above its current rock-bottom levels with consumer prices
rising at about 3.4 percent a year, compared with the 3.1 percent annual
rate recorded so far this year. But they say that prices would then
stabilize at that level and wouldn't accelerate, as other economist fear.
In fact, they argue that a moderate level of price increases -- not zero
inflation -- is the ideal because it allows the maximum number of Americans
to hold jobs without threatening the economy. ... (Yochi J. Dreazen in
Wall Street Journal, page A2).
The consumer confidence index declined 5.9 percentage points from 144.7
percent in May to 138.8 percent in June. This was attributed mainly to a
drop in the expectations for business conditions 6 months ahead, although
the present-situation measure also turned down. Taken in the context of
other economic reports showing somewhat slower growth, this latest report
"points toward a bit of a cooling," the director of the Conference Board's
consumer research center told the Bureau of National Affairs. But the size
of the decline does not suggest a sharp turnaround in consumer spending, the
director said. ... (Daily Labor Report, page A-10)_____Consumer confidence
fell in June, reflecting concern with the direction of the economy in the
face of rising interest rates and soaring gasoline prices. The June reading
remains near record levels and is not seen as a sign of an end of economic
growth. But consumers did begin to indicate that they were less optimistic
about future economic conditions (Washington Post, page E11)_____Consumer
confidence fell in June from a record high a month earlier, dampened by
higher gasoline prices and the Federal Reserve's effort to slow the economy.
... (New York Times, page C10)_____Consumers are feeling somewhat less
secure about the economy. As the Federal Open Market Committee enters its
second day of meetings, its members should welcome a sign of waning consumer
optimism. More Americans expect the number of jobs will shrink over the
next 6 months, and fewer said they planned to buy new cars or homes than in
May. ... (Wall Street Journal, page A2).
Internal Revenue Service data shows just how far prosperity has spread
across America, with stock options, two-career couples, and capital gains
helping to lift a record number of families to six-figure annual incomes.
One taxpayer in 15 resided in this economic realm in 1998, Treasury reported
-- an increase of 1.1 million over 1997. The number of taxpayers (IRS
counts a married couple who file jointly as one taxpayer) with incomes of
$100,000 or more soared in 1998 to 8.3 million, up 15 percent from 7.2
million in 1997, preliminary figures from 1998 income tax returns showed.
... Analysis of the IRS data also showed that the share of the economic pie
going to those making $100,000 or more expanded to 36.9 percent in 1998,
from 34.2 percent in 1997. ... (New York Times, page C1),
Competing for the smallest pool of college graduates of accounting programs
in more than a decade, many of the nation's largest accounting firms and
associations have begun grooming talent at secondary schools, the latest
battlefield in an industrywide recruitment war. With scholarships and
internships in hand, they are hoping to resuscitate a field that is rapidly
losing conscripts to the wonders of technology and the glamour of being an
entrepreneur. A 23-percent drop in enrollment in college accounting programs
since 1996 -- meaning that about 10,000 fewer accounting graduates come into
the workplace -- has persuaded many in the industry to focus on still
younger students, before they are whisked away by more scintillating majors.
Their goal is not to pluck recruits fresh from high school, but to plant the
corporate flag and push college-bound students into the field. ... (New
York Times, page C11).
U.S. global competitiveness will suffer unless this country takes immediate
steps to address the needs of America's information technology workforce,
the 21st Century Workforce Commission warns in its report to Congress
entitled ""A Nation of Opportunity: Building America's 21st Century
Workforce". There needs to be a new level of "21st Century literacy:" to
meet the needs of the nation's new information economy. ... Citing
Department of Commerce statistics, the report said that, by 2006, nearly
half of all U.S. workers will be employed in industries that produce or
intensively use information technology products and services. It also cited
Bureau of Labor Statistics data indicating that, between 1998 and 2008, more
than 2 million new skilled IT workers will be needed to fill newly created
jobs and to replace IT workers leaving the field. ... (Daily Labor Report,
page A-7).
Unsustainable trends, the late economist Herbert Stein wryly observed,
simply do not last. And the unsustainable trend currently stirring a heated
debate in economic circles is the nation's record trade gap, which along
with a net outflow of investment income, pushed the current-account deficit
last quarter to 4.2 percent of gross domestic product -- its highest level
in at least 120 years. ... Consultant L. Douglas Lee of Economics from
Washington Inc. thinks the trade deficit itself is overstated. ... Lee
points to anomalies in economic data. The first is the gap between the two
ways the nation's output is measured: via spending on final product and via
income flows. While the product accounts are viewed as more reliable and
are used in calculating GDP, the income accounts usually track them closely.
Since the start of 1997, however, a large "statistical discrepancy" has
opened between the two measures, with the income data showing significantly
faster growth. Commerce Department officials have speculated that this gap
may reflect an undercounting of exports. Indeed, a 1997 Census Bureau study
estimated that U.S. merchandise exports could be understated by as much as
10 percent, or $60 billion. One reason is that more and more small
businesses and small-volume shippers have become exporters in recent years,
and data reporting for these companies is skimpy. ... Another anomaly, says
Lee, is the divergence between the current-account deficit (mainly
reflecting trade data) and the savings deficit, which is the amount by which
domestic savings fall short of domestic investment. By definition, the two
should be mirror images, but in recent years the savings deficit has been
about 40 percent smaller. In short, Lee thinks faulty measurement of U.S.
exports has resulted in significantly overstated trade and current-account
deficits. If he's right, it would not only help explain the dollar's
persistent strength but would also give a lift to recent productivity and
output data. And it would lessen the chances of capital flight that some
fear could eventually derail the expansion (Business Week, July 3, page 32).
Some Fed members think these factors may have increased the economy's
sustainable growth rate: l. Strong productivity. In the first quarter,
nonfarm productivity increased by a stunning 3.7 percent. 2. Stable unit
labor costs. They've risen just 0.6 percent over the past year, helping to
keep inflation for both producers and consumers in check. 3. Soaring
capital investment. Corporate spending on efficiency-enhancing equipment
and computer software climbed at an annual pace of 27 percent in the first
quarter. ... (Business Week, July 3, page 41).
DUE OUT TOMORROW: Employer Costs for Employment Compensation -- March 2000
DUE OUT FRIDAY: Mass Layoffs in May 2000
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