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 Analysis of the 1997 U.S Employment Statistics

The Upsizing of America

But Services Growth Slows; Its Wages Are Well Below Rest of Economy

PHOENIX - There are more, higher-paid jobs everywhere in America. The latest U.S. Bureau of Labor statistics show increases in 1997 in ALL industries - from agriculture, to mining, to construction, to manufacturing to services.

Overall, the U.S. employment was up 2.1%. The private sector jobs surged by 2.7%, while the three tiers of government downsized by 1.8%.

Of particular note is the resurgence in, what we called the "19th century jobs," those in agriculture and mining. These two sectors posted 3.3% and 18.4% gains respectively.

Construction also had a strong showing in 1997 with a 5.0% increase total jobs, while services and manufacturing rose by 2.5% and 2.0% respectively.

Where is the growth coming from?

From the White House, if you listen to the Clinton administration's self-congratulatory comments. From Wall Street and the Fortune/Forbes 500 boardrooms, if you pay attention to the establishment media.

The truth is - none of the above. It's coming from Main Street, the small and medium size American companies. The Bureau of Labor doesn't not keep employment statistics by types of enterprises (wonder why not?). But a September 1996 Wall Street Journal Oped, written by Fidelity Management's vice chairman, Peter Lynch, showed that in the 1980s, for example, the Fortune/Forbes 500-type companies dumped some 3 million American jobs like excess baggage, and are in the process of doing an encore in the 1990s. Yet the U.S. economy recorded a net INCREASE of 18 million jobs during the same decade!

upsiz-us.gif (5866 bytes) In other words, American entrepreneurs generated 21 million new jobs in the 1980s, while the corporate elite was busy building factories and distribution channels in China, Korea, Indonesia and elsewhere in the developing world. (We will refrain from dwelling on the "wisdom" of such globalists in view of the Asian financial crisis, since that's a bit off topic for this Bulletin).

More Better-Paid Jobs

Meanwhile, back to the U.S. job market, not only were there more jobs in 1997 than the year before, but they were better-paid jobs too. The number of the lowest-paid wage earners, those making less than $5 per hour, plummeted by 71% in the private sector, and by 45% in government jobs, relative to 1996.









At the same time, ALL higher wage categories showed increases, with the highest-paid jobs surging the most (up 17.5% in private, 8.5% in public sector).

As a result, the average 1997 wage rose by 4.2% overall to $10.92 per hour. It was up by 4.5% in the private sector to $10.68 per hour, and by 2.9% for government jobs to $12.63 per hour.

But before you start to rejoice that public sector increase was lower than that in private industries, let us point out that government workers were overpaid to begin with, relative to their peers in the private services sector.









The average 1997 wage in the latter job market segment was $6.87 per hour. This means that government workers, who made and average of $12.63 per hour, were paid 84% MORE that those in private services enterprises!

So while the government sector has made some headway in its own downsizing, there is still a wide discrepancy between the civil servants' wages, and those in private businesses.

What the government needs to do is pretty self-evident. Implement immediately DEEP salary cuts at all wage levels except for those earning $5 per hour or less. Invest in productivity-boosting tools, such as Information Technology (IT) equipment and services.

After all, it is precisely because the IT technology helped increase the productivity of American businesses, that the U.S. worker was able to have a 4.2% wage increase in 1997 without a corresponding inflation. The American worker got paid more in 1997 for producing more.

Services Jobs' Growth Slows

The wage issues apart, there has been a discernible slowdown in the growth rate of the U.S. services jobs (up 2.5% in 1997). This segment of the economy added about 900,000 new jobs in each of the last two years. That's not bad. But it's not as good as in 1995, when this sector generated 1.1 million new jobs, or in 1994, when it created 2.4 new employment opportunities.









Nevertheless, the service sector still account for 72.4% of all U.S. jobs, well ahead of manufacturing (19.4%), construction (6.1%), and resource-based industries (2.1%).

Debunking a Myth

One of the bogus arguments which some modern-day "Luddites" put forth is that the IT technology has caused the downsizing in the job market.

That's hogwash. For at least three reasons.

First, because America has been UPSIZING, not DOWNSIZING, as you have just seen from the latest labor statistics. And that includes the IT industry, which employs over 4.5 million Americans, and accounts for about 6% of the U.S. GDP, according to the American Electronics Association. The IT payrolls have been on the rise steadily ever since 1992.

Second, while it is true that some segments of the economy have downsized, that's been generally the case with large multinational companies in the manufacturing sector. This type of downsizing was brought on not by IT technology, but by their globalist CEOs, who have simply shifted production to lower labor cost markets overseas.

Judging by a large number of layoffs announced in the fourth quarter 1997 by companies such as AT&T, GM, Kodak and other Fortune/Forbes 500 types, it would not surprise us if the 1998 job statistics do show an actual decline in the manufacturing sector.

Third, the IT implementation boosts the productivity in varying degrees in all industries across the economy. Sometimes, this leads to a creation of new companies (i.e., new economic values), often as joint ventures between computer enterprises and their customers, as the latter shift the focus from traditional "core" businesses to the more lucrative IT market.









Some examples which come to mind are - the American Airlines' SABRE system, CSC/Andersen Consulting joint venture with Dupont; EDS' alliance with Bell South; IBM's joint ventures with Novartis (Switzerland) and Telstra (Australia), and so on. In all these cases new job opportunities open up in the hybrid companies.

Meanwhile, the IT industry already accounts for about 30% of the U.S. GDP growth. And its workers are paid about 73% more than their peers in other private sector companies, according to the American Electronics Association.

Now what do you say about that, "Luddites?"

Happy bargain hunting!

Bob Djurdjevic

Ten additional charts and two tables are also included in the print edition.

Can you afford not to know such things if you're a global competitor?  If you agree, call us as (602) 824-8111.

Or check out also "Two Faces of Globalism", and "Russia Is Still the Bogey"  Annex Bulletins.

Volume XIV, No. 98-29
August 2, 1998

Editor: Bob Djurdjevic
Published by Annex Research;

5110 North 40th Street,      Phoenix, Arizona 85018
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