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Jobs grow steadily in June

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Times Staff Writer

The government’s report Friday that the economy added 132,000 jobs in June showed steady if not spectacular growth, but economists said it was unlikely to elicit a shift in interest rates.

The Labor Department’s job figures were slightly above private economists’ forecast of 125,000 and were enough to keep up with growth in the workforce and hold the unemployment rate steady at 4.5%. The department also revised upward the number of jobs added in April and May by 75,000.

June’s gains were narrowly based in the service sector, particularly government, education, health and leisure. While state and local governments generated nearly a third of new jobs, manufacturing jobs declined for the 12th straight month, and retail, trade, and professional and business services also slipped.

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Private economists predicted no shifts in economic policy by either the Bush administration or the Federal Reserve Board as a result of Friday’s data. In particular, they saw no reason for the Fed to abandon its year-old policy of leaving the federal funds interest rate -- the rate that banks pay each other for overnight loans -- unchanged at 5.25%.

John Shin, an economist at Lehman Bros., said in a note to clients that he expected economic growth in the second quarter of 2007 to have rebounded smartly from the anemic 0.7% annual rate recorded in the first three months of this year. He also said inflation, even excluding volatile food and energy prices, should remain above the Fed’s “comfort zone” of 1% to 2%. Both these developments might encourage the Fed to raise interest rates.

But Shin said the danger that higher rates would send the shaky housing sector into a second tailspin would lead the Fed to leave interest rates untouched through not only this year but also the next.

Although the Bush administration hailed the 46th straight month of overall employment gains, the economy has been adding jobs more slowly than in the 1990s.

The addition of 2 million jobs during the 12 months ending in June was barely more than half the total new jobs in 1994 and lower than the annual totals of each year from 1993 to 1999.

Some economists also noted that salaries have hardly risen during the current economic expansion, probably because employers have not had to pay more to attract and keep workers.

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Friday’s Labor Department report showed a rise of 0.3% last month in average hourly earnings of production and nonsupervisory workers, to $17.38. Earnings have risen 3.9% in the last 12 months.

But with the consumer price index rising 2.7% in the most recent 12 months (ending in May) for which there are data, the average worker was left with an inflation-adjusted pay raise of only 1.2%.

“Just because job growth is better than expected doesn’t mean that it is strong,” said Christian Weller, chief economist for the liberal Center for American Progress. “Workers who are burdened by high prices and near-record amounts of household debt need faster job and wage growth, not lowered expectations.”

Roy G. Krause, president and chief executive of Spherion Corp., a recruiting and staffing company, said the jobs report at least spelled good news for his business.

He said talented workers were doing just fine, with an unemployment rate among college graduates of about 2%.

Making more business for Spherion, Krause said, college-educated workers are typically trying several jobs before settling on the one they like best.

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And businesses are keeping older workers nearing or past retirement age employed at least part-time by dividing their workload into projects that they can do at their own pace.

“As a result,” Krause said, “this recovery has been a lot different from previous ones. We’re used to boom and bust, but this recovery has been more slow-growth and steady.

“Employers have learned that, with competition from all corners of the globe, they must be more cautious.”

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joel.havemann@latimes.com

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