Jobless Rate of 5.5% Essentially Is Unchanged
The nation’s unemployment rate remained essentially unchanged in May, the government reported Friday, but industry created fewer new jobs than it did in April, suggesting that the economy is starting to slow and will not overheat.
The Labor Department’s monthly report showed the jobless rate among civilians and members of the armed forces at 5.5% last month. That was barely higher than the 5.4% recorded in April--the lowest rate since June, 1974--and economists say increases of that size are statistically insignificant.
However, the number of new workers on payrolls rose by only 209,000 in May, down from a more robust 249,000 increase the previous month. In the manufacturing sector, job growth slowed to only 16,000 in May, down from 54,000 in April.
California Rate Rises
The Labor Department reported separately that the unemployment rate for California rose to 6.3% in May, up from 5.1% in April, as the number of job-holders declined by 111,000.
“It’s a one-month change and could very well be a statistical aberration,” said Suzanne Schroeder, a spokeswoman for the state Employment Development Department.
“We’ll need at least one more month, probably two, to determine if this is a trend. A year ago at this time, it was 6.1 (percent), and when we were at 6.1 we thought we were very well off.”
She said the rate increase may have been influenced by a change in how the U.S. Bureau of Labor Statistics does its monthly calculations. The bureau reduced the sample size from 5,200 to 3,080 households in May, she said.
There were 13,251,000 people at work in the state last month, contrasted with 891,000 unemployed, she said.
Economists generally interpreted the slowdown in the growth of jobs nationwide as a favorable sign that the economy can escape some of the inflationary pressures that some analysts had been fearing.
“If the fear of the last couple of months was that the economy was going too fast, this takes the edge off that fear,” said George L. Perry, a Brookings Institution economist. “The economy is going to be moving ahead, but not too fast.”
Referring to Vice President George Bush, who has locked up the Republican presidential nomination, he said: “It’s not going to be a bad economy to run on.”
A Similar View
Financial markets took a similar view. Interest rates declined moderately, and yields on long-term bonds closed the day at between 9.1% and 9.2%, reflecting a further dampening of fears about the possibility of renewed inflation.
Particularly encouraging to some analysts was that the slowdown in manufacturing job growth came mainly in industries that produce consumer goods, indicating that domestic demand is starting to abate.
Some analysts had feared that unless demand began to ease at home, many industries would not have sufficient production capacity to meet both domestic orders and demand for exports, eventually leading to supply bottlenecks and a new round of price increases. Previous economic statistics had shown little sign of consumer slowdown.
Consumers Cutting Back
But Jerry Jasinowski, executive vice president and chief economist of the National Assn. of Manufacturers, said Friday’s figures showed consumers have been cutting back after all, while business spending for capital goods--needed to increase existing production capacity--has been continuing apace.
“This is good because it means the economy has embarked on a shift” from consumer-led growth to export-led growth--a change that is needed to help reduce the U.S. trade deficit, Jasinowski said.
“Consumers had been running a marathon,” he said. “This will keep growth at moderate levels and prevent inflation from accelerating.”
The scant increase in the jobless rate marked the first rise in the unemployment rate in 20 months. The May figure was still about half the 10.8% rate recorded in November, 1982, at the end of the deep recession that marked the Reagan Administration’s first two years in office. It was close to the 5.6% rate of May, 1979, the high-water mark during President Jimmy Carter’s term in office.
Excluding the military, last month’s unemployment rate was 5.6%, up 0.2 of a percentage point from the level recorded in April.
Number of Jobs Fell
Although the Labor Department’s survey of workplaces disclosed moderate job growth in May, its separate survey of households suggested that the total number of jobs in the economy fell by 535,000 between April and May.
However, Janet L. Norwood, commissioner of the Bureau of Labor Statistics, cautioned that technical difficulties made the household survey data “more difficult to interpret” than the statistics gathered from company payrolls.
Private economists echoed this view. “There is an awful lot of statistical noise” in the household figures, the NAM’s Jasinowski said.
According to the payroll survey, virtually all of May’s job growth came in the service sector of the economy. Job growth in the medical services industry continued to expand rapidly, swelling by 35,000 jobs in May. The wholesale trade sector also increased its hiring significantly over the month.
The bulk of the increase in unemployment came among adult men, whose jobless rate rose to 4.9%, after a decline to 4.6% in April. Jobless rates for other categories of workers were little changed over the month. These included rates of 4.9% for adult women, 15.6% for teen-agers, 12.4% for blacks and 9% for Latinos. The total number of people out of work rose to 6.78 million, up 173,000 from April.
A Marked Improvement
At the same time, however, the May figures also showed a marked improvement in the ability of Americans seeking full-time work to find it rather than having to settle for part-time jobs. The number of people holding part-time jobs “for economic reasons” fell by 350,000 over the month, the department disclosed.
Those on the lookout for signs of possible new inflation pressures found one disturbing note in Friday’s report. The figures showed that the department’s index of hourly earnings of payroll workers rose 0.5% in May, indicating that wage pressures--a major factor in the inflation picture--may be intensifying. The index rose 0.4% in April.
However, Brookings’ Perry said he thought that despite the May increase, overall wage pressures remained relatively modest. “If you ask whether we’re off to the races, I still would say no,” he said.
