FOR DELIVERY: 9:30 A.M., E.S.T. FRIDAY, FEBRUARY 2, 2001 Advance copies of this statement are made available to the press under lock-up conditions with the explicit understanding that the data are embargoed until 8:30 a.m. Eastern Standard Time. Statement of Katharine G. Abraham Commissioner Bureau of Labor Statistics Friday, February 2, 2001 Good morning. I appreciate this opportunity to comment on the highlights of the labor market data we released this morning. The unemployment rate rose to 4.2 percent in January. Payroll employment increased by 268,000, but this follows a gain of only 19,000 (as revised) in December and a total of just 138,000 in the entire fourth quarter of 2000. Moreover, to a great extent, January's job gain reflected unusually large seasonally adjusted increases in just two areas-- construction and the Federal government. Elsewhere, the services industry turned in another subpar performance, and the downward trend in manufacturing employment continued. Construction employment rose by 145,000 in January, after seasonal adjustment. This more than offset weather- related employment declines in November and December. The weather in those months was unusually severe, resulting in larger-than-expected seasonal layoffs. In contrast, January's weather was relatively mild, and there were far fewer layoffs than expected, particularly in outside activities such as masonry, roofing, concrete work, and heavy construction. Over the 3 months combined, construction employment rose by 39,000 a month, on average, well above the trend for the rest of last year. We will need to wait for future months' data to see whether January's large job gain reflects underlying strength in construction or merely the problems inherent in seasonally adjusting estimates of employment for the industry during the winter months. In government, Federal employment rose by 37,000, but that gain resulted from an unusually large increase in postal employment (after seasonal adjustment). January is typically a layoff month at the Postal Service, as workers hired for the holiday mailing rush are let go. This holiday season, however, our survey did not register the typical holiday buildup in postal employment and consequently did not register the typical post-holiday layoffs. The services industry added 81,000 jobs in January. Although this is a bigger gain than in any of the prior 3 months, services job growth clearly has dropped off since the middle of last year. During the first 6 months of 2000, the industry added an average of 116,000 jobs a month; average growth has slowed to 69,000 a month during the last 7 months. Much of this slowdown is attributable to the help supply industry. Since its most recent peak in April, help supply employment has fallen by 184,000, including a decline of 39,000 in January. Some of the weakness in this industry may be tied to the recent downturn in manufacturing. Although we do not collect this information on a monthly basis, we know from periodic surveys that many workers in help supply are assigned to jobs in manufacturing. On the positive side, health services had an above- average gain in January, with growth concentrated in doctors' offices and hospitals. Newly signed legislation increases Medicare payments that benefit both of these industries. Other industries showing some strength in January were real estate and mortgage banking. The former has benefited from continued strength in home sales, while the latter has experienced an upswing in mortgage refinancing. The biggest negative in the employment picture is still manufacturing, which lost 65,000 jobs in January. This brings factory job losses since June to about a quarter of a million. The factory workweek increased by half an hour in January, but this is only a partial rebound from the sharp drop in December, when several severe snowstorms curtailed manufacturing activity. Since July of 2000, factory hours have dropped by 0.8 hour, and factory overtime by half an hour. In January, there was an especially large decline (38,000) in auto manufacturing. Employment in this industry is down by 85,000 from its most recent peak in June. Auto industry employment has been on a downward trend for several months. January's large decline reflects temporary plant shutdowns to reverse the recent buildup in car inventories due to declines in auto sales in the last 3 months of 2000. Auto workers' hours also have declined; the workweek in January (40.8 hours) was about 3 hours lower than just a few months ago. Average hourly earnings of production or nonsupervisory workers were unchanged in January after experiencing accelerated growth in the fourth quarter of 2000. Over the year, hourly earnings are up 3.9 percent. Some of the weakness that has been evident in our establishment survey in recent months may have started to show up in our household survey in January, although I would caution against reading too much into one month's numbers. The unemployment rate increased to 4.2 percent, and both the number of unemployed job losers and the number of newly unemployed (those unemployed less than 5 weeks) rose. Obviously, though, January's jobless rate is still very close to the narrow 3.9 to 4.1 percent band that had prevailed for over a year. It also is worth noting that the proportion of the population with jobs, at 64.5 percent, remains near a record high. In summary, unemployment rose in January. Payroll employment increased, but special factors may have led to an overstatement of the over-the-month job gain in construction and in government. Manufacturing employment continued on its downward trend. My colleagues and I now would be glad to answer any questions you might have.