Special Edition

More Jobs and Better Pay in 2006

By Peter Coy
BusinessWeek Online

With a growing economy, increased production, and inflation easing, U.S. workers should enjoy the new year -- most of them, anyway

Are you in the market for a new job in '06 -- or feeling nervous about the one you have now? It's natural to worry. Airlines and auto makers have been slashing payrolls. Factory workers in one industry after another are losing their jobs to China. Even those who kept their jobs in 2005 have been falling behind. After adjusting for inflation, the wages and benefits of American workers actually fell 1.5% in the year that ended this past September.

The good news is that for workers in most sectors of the economy (not all), 2006 looks like it will be a somewhat better year. There are three reasons for this: The economy is likely to keep growing at a reasonable pace, creating a growing demand for labor. Workers are getting more productive, so they can justify asking for more money. And energy prices aren't likely to zoom the way they did in 2005, so inflation will probably slow down, letting Americans keep more of their hard-earned money.

Go to BusinessWeek Online to view the 2006 employment outlook.

Who will win and who will lose in the new year? Check out the slideshow forecasting the 2006 jobs outlook in a dozen sectors of the U.S. economy. Here's a thumbnail sketch:

• Shifts in the economy will continue to benefit highly educated workers at the expense of less-educated ones, who are more vulnerable to automation and competition from cheap foreign labor. Management consultants, architects, engineers, and the like ought to do well.

• Employment and pay in high tech could accelerate in '06 as business finally gets over the late '90s tech bubble.

• Health care should stay strong, with good demand for doctors and nurses.

• Construction is likely to remain one of the healthiest of the blue-collar employers, although the action is likely to shift to office and industrial buildings from single-family homes.

• The housing boom's fizzle will hurt the real estate sector. Expect lots of agents to put their licenses on ice.

• Manufacturing will be mixed: Some sectors, such as tech, should benefit from rising business investment. But others, including motor vehicles, are likely to stay soft.

Here are a few snapshots from economists we talked to:

David Wyss, chief economist of Standard & Poor's: "We're really seeing a shift in the mix of jobs. The U.S. economic distribution has become more unequal over the last 20 years. College-educated workers are seeing their incomes rise much more rapidly than non-college-educated, especially the blue-collar assembly-line worker."

Chris Varvares, president of Macroeconomic Advisers: "It will be a better year for workers. With declining energy prices, instead of having [consumer prices] rise 3.9%, they'll rise 1.9%. Other things being equal, households should pick up 2 percentage points right there."

Steven J. Davis, University of Chicago Graduate School of Business: "The economy seems to be doing pretty well, and I don't have any reason to think that will change in '06."

Ken Goldstein, labor economist at the Conference Board: "I think most economists are too optimistic about 2006.... It's more expensive to hire now, and the profit margin is slimmer. The expectation that business will just open its doors -- I just don't see it."

Go to BusinessWeek Online to view the slideshow.

Back to Special Edition: 2006 Outlook

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