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Labor market still needs improvement

California was creating jobs at the rate of 1.9 percent, but wages remain a stumbling block

Posted: January 5, 2013 2:00 a.m.
Updated: January 5, 2013 2:00 a.m.

On the heels of Friday’s labor report, which said 155,000 jobs were added in December nationwide, an economist reported the basic elements of recovery continue to show improvement.

“The economy is still cruising and the labor markets are healing,” said Kimberly Ritter-Martinez, economist at the Kyser Center for Economic Research in Los Angeles.

Health care leads the way in job growth, having added 338,000 jobs in 2012, Ritter-Martinez said.

And, despite fears of going over the “fiscal cliff,” builders and manufacturers continued adding jobs, according to the report by the U.S. Labor Department.

There continue to be declines in wholesale trade, information, retail and government sectors, she said.

In 2012, more than 1.8 million jobs were added by employers, averaging 153,000 jobs per month.

The number of jobs lost nationwide since the recession officially began five years ago, however, remains nearly 9 million. At December’s growth rate, the labor market will not fill that gap until the end of 2021, said Heidi Shierholz of the Economic Policy Institute on Friday.

“To get back to the pre-recession unemployment rate in three years — by the end of 2015 — would require adding around 330,000 jobs every month between now and then,” Shierholz said in a statement.

Forty percent of the unemployed population has been without jobs for 27 weeks or longer, Ritter-Martinez said.

That fact poses a significant problem, she said.

Still there is good news locally.

“California and Los Angeles County have actually grown at rates slightly faster than (the) U.S. as a whole,” Ritter-Martinez said.

In November, California was creating jobs at the rate of 1.9 percent and L.A. County at 1.8 percent, she said. Nationally, the year-over-gain was lower at 1.4 percent.

But wages remain a stumbling block to faster economic growth, she reported.

Nationally, average hourly wages rose 7 cents to $23.73 last month, she said. That’s a 2.1 percent increase when compared to a year ago. Inflation rose 1.8 percent.

“Wages are generally keeping up with inflation,” Ritter-Martinez said.

But the wage gains aren’t big enough to stimulate strong increases in consumer spending. On the flip side, with wages rising only modestly, there shouldn’t be a great risk of inflation, either, she said.

Coupled with the 2 percent hike in payroll taxes that took effect Jan. 1 — which affects everyone who brings home a pay check — experts aren’t sure how much of an impact increased wages will have on spending, Ritter-Martinez said.

On average, people save between 3 percent and 4 percent of their earnings, she said. It’s not known whether they’ll save less due to tax hikes, so there may not be a direct tie between the increased payroll taxes the amount consumers spend.

The bright spot might be the 30,000 new construction jobs added in December — the most in 15 months.

Construction in California is up 4.5 percent; L.A. County is slower but still up by 1.9 percent, Ritter-Martinez said.

“As the housing market starts to gain momentum, it will be a source of growth for the economy and the labor market,” she said.

As for the housing meltdown, Ritter-Martinez said the local economy is still digging its way out of the mess. But with limited inventory on the market, she expects building permits to be up 25 percent to 30 percent in 2013.

New home construction is an important sector for growth, she said. Besides homes, people buy all kinds of appliances, furnishings and services, fueling spending.

“The population is still growing, and people who doubled up in houses (with other family members) will go out and start renting apartments or buying homes,” she said. “We’re starting to see increased demands for housing.”



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